Question

Alternative Inventory Methods

Park Company's perpetual inventory records indicate the following transactions in the month of June:

Units Cost/Unit
Inventory, June 1 200 $3.20
Purchases:
      June 3 200 3.50
      June 17 250 3.60
      June 24 300 3.65
Sales:
      June 6 300
      June 21 200
      June 27 150

Required:

1. Compute the cost of goods sold for June and the inventory at the end of June using each of the following cost flow assumptions: If required, round your answers to the nearest dollar.

FIFO

Cost of Goods Sold $ _____________
Ending Inventory $ ______________

LIFO (Round your intermediate calculations and final answers to the nearest cent.)

Cost of Goods Sold $ ___________
Ending Inventory $ _____________

Average cost (In your computations, round new per unit costs to the nearest cent. Round your intermediate computations and final answers to the nearest dollar.)

Cost of Goods Sold $ ___________
Ending Inventory $ ____________

Answer 1

Ans)

1.     FIFO: Cost of Goods Sold (650 units):

June 6     300 units:      200 units @ $3.20               $   640

100 units @ $3.50                    350

June 21    200 units:      100 units @ $3.50                    350

100 units @ $3.60                    360

June 27    150 units:      150 units @ $3.60                    540  

$2,240

Ending Inventory (300 units):

Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory

(200 x $3.20) + [(200 x $3.50) + (250 x $3.60) + (300 x $3.65)] - $2,240 =

                                                                                                   Ending Inventory

   $640           +              $2,695                           -            $2,240 = $1,095*

*300 units @ $3.65 = $1,095

2)

LIFO: Cost of Goods Sold (650 units):

June 6     300 units: 100 units @ $3.20                  $   320.0

200 unit @ $3.50 700.00

June 21    200 units             @ $3.60                             720.00

June 27    150 units             @ $3.65                             547.50

  $2,287.50

Ending Inventory (300 units):

Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory

       $640                     + $2,695      -          $2,287.50          =        $1,047.50*

*100 units @ $3.20 =      $   320.00

   50 units @ $3.60 =            180.00

150 units @ $3.65 =            547.50

  $1,047.50

3.     Average Cost:

June 1, Beginning Inventory                200 units @ $3.20 $   640

June 3, Purchases                                 200 units @ $3.50                  700

June 3, Balance 400 units @ $3.35 $1,340

June 6, Sales   300 units @ $3.35    (1,005)

June 6, Balance 100 units @ $3.35 $   335

June 17, Purchases   250 units @ $3.60                  900

June 17, Balance 350 units @ $3.53 * $1,235^#

June 21, Sales 200 units @ $3.53                 (706)

June 21, Balance 150 units @ $3.53 $   529^#

June 24, Purchases 300 units @ $3.65             1,095

June 24, Balance 450 units @ $3.61 $1,624^#

June 27, Sales   150 units @ $3.61                 (541)*

June 30, Balance 300 units @ $3.61 $1,083^#

Cost of Goods Sold (650 units) $1,005 + $706 + $541                  $2,252

Ending Inventory (300 units @ $3.61)                      $1,083^#

*Rounded

^#A slightly different answer may result due to rounding error