Question

Periodic Inventory by Three Methods; Cost of Merchandise Sold

The units of an item available for sale during the year were as follows:

Jan. 1	Inventory	50 units @ $112
Mar. 10	Purchase	60 units @ $120
Aug. 30	Purchase	30 units @ $126
Dec. 12	Purchase	60 units @ $132

There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

Cost of Merchandise Inventory and Cost of Merchandise Sold
Inventory Method	Merchandise Inventory	Merchandise Sold
First-in, first-out (FIFO)	$	$
Last-in, first-out (LIFO)
Weighted average cost

Answer 1

	Merchandise Inventory	Mercandise sold
FIFO	$                    10,440.00	$        14,060.00
LIFO	$                       9,200.00	$        15,300.00
Weighted average cost	$                       9,800.00	$        14,700.00

FIFO- Ending inventory
If FIFO method is used, Ending inventory cost includes most recent purchases made
During physical Inventory at Dec,31 ,Inventory in hand are 80 Units
Most Recent Purchase on Dec.12
60 unit @ $132			$    7,920.00
Next Recent Purchases on Aug.30
20 Units @ 126			$    2,520.00
Inventory cost at Dec,31 on 80 Units		$ 10,440.00

LIFO-Ending Inventory
LIFO method assumes last in material is sold out first , so older inventory is left over at the end of year
Oldest Inventory purchases or in hand on Jan.01
50 Units @ 112			$    5,600.00
Next oldest inventory purchases is on Mar.10
30 units @ 120			$    3,600.00
Inventory cost at Dec,31 on 80 Units according to LIFO Method	$    9,200.00

Weighted Average cost ending Inventory
Under this method, cost of goods that are available for sales are divided by number of units in inventory, This calculated average rate will be assign to unit sold and unit in hand to calculate cost
Date	Description	Units	Unit cost	Value
Jan.01	Inventory	50.00	$       112.00	$     5,600.00
Mar.10	Purchase	60.00	$       120.00	$     7,200.00
Aug.30	Purchase	30.00	$       126.00	$     3,780.00
Dec.12	Purchase	60.00	$       132.00	$     7,920.00
Total Units in hand		200.00	122.50	24,500.00
Average weighted rate is $122.5 which will be assign to inventory in hand or COGS
Inventory in hand are 80 units @ $122.5 is $9,800

FIFO-COGS
Cost of goods sold = Cost of beg inventory + purchases during the period – Cost of ending inventory
Cost of Beginning Inventory
50 units @ $112				$     5,600.00
Add Purchases during the period
60 units @ $120 on Mar.10			$     7,200.00
30 Units @ $126 on Aug.30			$     3,780.00
60 units @ 132 on Dec.12			$     7,920.00
Total cost of inventory available to sale			$   24,500.00
Less
Cost of Ending Inventory @ FIFO			$ (10,440.00)
Cost of Units sold -FIFO			$   14,060.00

LIFO-COGS
Cost of goods sold = Cost of beg inventory + purchases during the period – Cost of ending inventory
Cost of Beginning Inventory
50 units @ $112				$     5,600.00
Add Purchases during the period
60 units @ $120 on Mar.10			$     7,200.00
30 Units @ $126 on Aug.30			$     3,780.00
60 units @ 132 on Dec.12			$     7,920.00
Total cost of inventory available to sale			$   24,500.00
Less
Cost of Ending Inventory @ LIFO			$   (9,200.00)
Cost of Units sold -LIFO			$   15,300.00

Weighted Average COGS
Cost of goods sold = Cost of beg inventory + purchases during the period – Cost of ending inventory
Cost of Beginning Inventory
50 units @ $112				$     5,600.00
Add Purchases during the period
60 units @ $120 on Mar.10			$     7,200.00
30 Units @ $126 on Aug.30			$     3,780.00
60 units @ 132 on Dec.12			$     7,920.00
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