Question

Inventory Costing Methods—Perpetual Method

Arrow Company is a retailer that uses the perpetual inventory system.

August	1	Beginning inventory	80	units of Product A @	$1,600	total cost
	5	Purchased	100	units of Product A @	$2,116	total cost
	8	Purchased	200	units of Product A @	$4,416	total cost
	11	Sold	170	units of Product A @	$4,800	total sale

Calculate the inventory cost of item A on August 11 (after the sale) using (a) first-in, first-out, (b) last-in, first-out, and (c) the weighted-average cost methods.

Do not round until your final answers. Round your final answers to the nearest dollar.

Answer 1

• Inventory cost after sale would be:

	Ending Inventory
FIFO	$                   4,628
LIFO	$                   4,378
Weighted Average	$                   4,494

• Working

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory = Answer
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	80	$                20.00	$                        1,600.00	80	$               20.00	$                 1,600.00	0	$                 20.00	$                         -
Purchases:
05-Aug	100	$                21.16	$                        2,116.00	90	$               21.16	$                 1,904.40	10	$                 21.16	$                211.60
08-Aug	200	$                22.08	$                        4,416.00	0	$               22.08	$                              -	200	$                 22.08	$            4,416.00
TOTAL	380		$                        8,132.00	170		$                 3,504.40	210		$            4,627.60
LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory= Answer
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	80	$                20.00	$                        1,600.00	0	$               20.00	$                              -	80	$                 20.00	$            1,600.00
Purchases:	0	$                       -	$                                     -
05-Aug	100	$                21.16	$                        2,116.00	0	$               21.16	$                              -	100	$                 21.16	$            2,116.00
08-Aug	200	$                22.08	$                        4,416.00	170	$               22.08	$                 3,753.60	30	$                 22.08	$                662.40
TOTAL	380		$                        8,132.00	170		$                 3,753.60	210		$            4,378.40

Weighted Average	Units	Cost per unit	Total
Beginning Inventory	80	$            20.00	$       1,600.00
Purchases:
05-Aug	100	$            21.16	$       2,116.00
08-Aug	200	$            22.08	$       4,416.00
Total Purchases	300		$       6,532.00
Goods Available for Sales	380		$       8,132.00
Weighted Average cost per unit		$          21.400
Cost of Goods Sold	170	$          21.400	$       3,638.00
Ending Inventory	210	$          21.400	$       4,494.00 Answer