Question

Inventory Costing Methods-Periodic Method The Lippert Company uses the periodic inventory system. The following July data are for an item in Lippert's inventory: July 1 Beginning inventory 40 units @ $9 per unit 10 Purchased 60 units @ $10 per unit 15 Sold 70 units @ 26 Purchased 35 units @ $11 per unit Calculate the cost of goods sold for July and ending inventory at July 31 using (a) first-in, first-out, (b) last-in, first-out, and (c) the weighted-average cost methods. Round your final answers to the nearest dollar. A. First-in, First-out: Ending Inventory Answer Cost of Goods Sold: Answer 960 B. Last-in, first-out: Ending Inventory Answer 360 Cost of Goods Sold: Answer 985 C. Weighted-average cost: Ending Inventory Answer 0 Cost of Goods Sold Answer 0

please help

Answer 1

Answer)

Facts of the Question:

Date	Particulars	Number of Units	Cost Per unit	Total Cost
July'1	Beginning Inventory	40	$                        9	$             360
July'10	Purchased	60	$                     10	$             600
July'15	Sold	70
July'26	Purchased	35	$                     11	$             385

Cost of goods and value of ending inventory using FIFO method, periodic inventory system

Cost of Goods sold

Under FIFO method using periodic inventory system, cost of goods sold is calculated on the assumption that units of inventory which are first bought will be sold first and so on. Thus the cost of goods sold will be from the units of inventory which are first and moving forward.

Date	Number of Units	Cost per unit	Amount
July’1	40	$                        9	$        360
July’10	30	$                     10	$     300
Total	70		$   660

Therefore the cost of goods sold using FIFO method, periodic inventory system is $ 660

Value of ending inventory

Under FIFO method using periodic inventory system, Value of ending inventory is calculated on the assumption that units of inventory which are first bought will be sold first and so on. Thus value of ending inventory will be from the units of inventory which are Latest bought and moving backwards.

Date	Number of Units	Cost per unit	Amount
July’10	30	$                     10	$     300
July’26	35	$                     11	$     385
Total	65		$     685

Therefore value of ending inventory using FIFO method, periodic inventory system is $ 685.

Cost of goods and value of ending inventory using LIFO method, periodic inventory system

Cost of Goods sold

Under LIFO method using periodic inventory system, cost of goods sold is calculated on the assumption that units of inventory which are latest bought will be sold first and so on. Thus the cost of goods sold will be from the units of inventory which are latest and moving backwards.

Date	Number of Units	Cost per unit	Amount
July’26	35	$          11	$    385
July’10	35	$          10	$    350
Total	70		$ 735

Therefore the cost of goods sold using LIFO method, periodic inventory system is $ 735.

Value of ending inventory

Under LIFO method using periodic inventory system, Value of ending inventory is calculated on the assumption that units of inventory which are latest bought will be sold first and so on. Thus value of ending inventory will be from the units of inventory which are first bought and moving forwards.

Date	Number of Units	Cost per unit	Amount
July’1	40	$             9	$360
July’10	25	$          10	$    250
Total	65		$    610

Therefore value of ending inventory using LIFO method, periodic inventory system is $ 610.

Calculation of cost of goods sold using Weighted Average cost method, periodic inventory system

Under weighted average cost method using periodic inventory system, value of ending inventory and cost of goods sold is calculated on the basis of a weighted average cost. Such cost is calculated by dividing the aggregate cost of units in the beginning inventory and cost units purchased during the period by the aggregate number of units in the beginning inventory and units purchased during the period.

Date	Particulars	Number of Units	Cost Per unit	Total Cost
July'1	Beginning Inventory	40	$                        9	$             360
July'10	Purchased	60	$                     10	$             600
July'26	Purchased	35	$                     11	$             385
Total	135		$         1,345

Weighted Average cost = $ 1,345/ 135 units

                                           = $ 9.963 per unit

Cost of goods sold = Number of units sold X weighted average cost per unit

                                  = 70 units X $ 9.963 per unit

                                  = $ 697 (rounded off)

Therefore cost of goods sold under weighted average cost method is $ 697.

Value of ending inventory = Number of in ending inventory X weighted average cost per unit

                                                = 65 units X $ 9.963 per unit

                                                 = $ 648 (rounded of)

Therefore value of ending inventory under weighted average cost method is $ 648.

Working Note:

Calculation of number of units in ending inventory

Number of units in ending inventory = (Number of units in beginning inventory + number of units purchased during the year – number of units sold)

                                                          = 40 units + (60 units + 35 units) – 70 units

                                                          = 65 units