In: Accounting
Flint Corporation sells a snowboard, EZslide, that is popular
with snowboard enthusiasts. Below is information relating to Flint
Corporation’s purchases of EZslide snowboards during September.
During the same month, 95 EZslide snowboards were sold. Flint
Corporation uses a periodic inventory system.
Date |
Explanation |
Units |
Unit Cost |
Total Cost |
||||
---|---|---|---|---|---|---|---|---|
Sept. 1 |
Inventory |
13 |
$102 |
$ 1,326 |
||||
Sept. 12 |
Purchases |
46 |
105 |
4,830 |
||||
Sept. 19 |
Purchases |
47 |
106 |
4,982 |
||||
Sept. 26 |
Purchases |
20 |
107 |
2,140 |
||||
Totals |
126 |
$13,278 |
(a) Compute the ending inventory at September 30 using the FIFO,
LIFO and average-cost methods. (Round average cost per
unit to 3 decimal places, e.g. 125.153 and final answers to 0
decimal places, e.g. 125.)
FIFO |
LIFO |
AVERAGE-COST |
||||
---|---|---|---|---|---|---|
The ending inventory at September 30 |
$Enter a dollar amount | $Enter a dollar amount | $Enter a dollar amount |
(b) Compute the cost of goods sold at September 30 using the FIFO,
LIFO and average-cost methods. (Round average cost per
unit to 3 decimal places, e.g. 125.153 and final answers to 0
decimal places, e.g. 125.)
FIFO |
LIFO |
AVERAGE-COST |
||||
---|---|---|---|---|---|---|
Cost of goods sold |
$Enter a dollar amount | $Enter a dollar amount | $Enter a dollar amount |
Closing inventory = Opening inventory + Units purchased - Units sold | ||||
=> Closing inventory = 13 units + 113 units - 95 units | ||||
=> Closing inventory = 31 units | ||||
FIFO | ||||
FIFO - This method assumes the inventory purchased first is sold first | ||||
If FIFO method is used, the 95 units sold would mean 13 units of opening inventory, 46 units of purchases made on Sept 12 and 36 units of purchases made on Sept 19 being sold | ||||
Therefore, the cost of goods sold shall be follows: | ||||
= (13 units @ $102) + (46 units @ $105) + (36 units @ $106) | ||||
=> $9,972 | ||||
Thus, under the FIFO method closing inventory of 31 units would mean 20 units of purchases made on Sept 26 and 11 units of purchases made on Sept 19. | ||||
Hence, closing inventory is valued at $3,306 (20 units @ $107 + 11 units @ $106) | ||||
LIFO | ||||
LIFO - This method assumes the inventory purchased last is sold first | ||||
If LIFO method is used, the 95 units sold would mean 20 units of purchase made on Sept 26, 47 units of purchases made on Sept 19 and 28 units of purchases made on Sept 12 being sold. | ||||
Therefore, the cost of goods sold shall be follows: | ||||
(20 units @ $107) + (47 units @ $106) + (28 units @ $105) | ||||
=> $10,062 | ||||
Thus, under the LIFO method closing inventory of 31 units would mean 13 units of opening inventory and 18 units of purchases made on Sept 12. | ||||
Hence, closing inventory is valued at $3,216 (13 units @ $102 + 18 units @ $105) | ||||
Average Cost | ||||
This method assumes that the cost of inventory is based on the average cost of goods available for sale during the period. | ||||
Average cost of inventory for the given question is calculated below: | ||||
Units | Price | Cost | ||
Beginning inventory | 01-Sep | 13 | $102 | $1,326 |
Purchases | 12-Sep | 46 | $105 | $4,830 |
Purchases | 19-Sep | 47 | $106 | $4,982 |
Purchases | 26-Sep | 20 | $107 | $2,140 |
Total | 126 | $13,278 | ||
Average cost of inventory = $13,278 / 126 units = $105.381 per unit | ||||
Thus, under the Average cost method cost of goods sold = 95 units @ $105.381 per unit = $10,011 | ||||
Closing inventory will be valued at $3,267 (31 units @ $105.381 per unit) | ||||
(a) Ending inventory at Sept 30: | ||||
FIFO | LIFO | Average Cost | ||
$3,306 | $3,216 | $3,267 | ||
(b) Cost of goods sold at Sept 30: | ||||
FIFO | LIFO | Average Cost | ||
$9,972 | $10,062 | $10,011 |