Question

Husky Lead has had the following inventory entries in the month of December.

Beginning Inventory 1000 units @ $10 each

Dec. 1 Purchased 3,000 units @ $15 each

Dec. 5 Purchased 4,000 units @ $20 each

Dec 12 Purchased 6,000 units @ 30 each

Dec 20 Purchased 12,000 units @ 28 each

Sold 3,000 units on Dec. 7 for $100 each

Sold 6,000 units on Dec. 14 for $350 each

1. Using FIFO Perpetual determine the cost of goods sold for HUSKY Lead.
2. Using LIFO Perpetual determine the cost of goods sold for HUSKY Lead.
3. Using FIFO Periodic determine ending inventory.
4. Using Weighted Average periodic determine the gross margin for Husky.
5. Determine the Cost of Goods Available for Husky.

Answer 1

FIFO: Under the FIFO method, it is assumed that the goods purchased first are the goods sold first. So the ending inventory would represent the goods purchased later in point of time.
LIFO: Under the LIFO method, it is assumed that the goods purchased last are the goods sold first. So the ending inventory would represent the goods which are purchased first in point of time.
Weighted average: Under the weighted average cost method, weighted average cost per unit is found for units available for sale and the weighted average cost arrived is used to calculate ending inventory and cost of goods sold.