Question

For the current year, Parker Games has the following inventory transactions related to its traditional board games. Parker Games uses a periodic inventory system. Date Transaction Units Unit Cost Total Cost Jan. 1 Beginning inventory 114 $ 19 $ 2,166 Mar. 12 Purchase 73 14 1,022 Sep. 17 Purchase 43 7 301 230 $ 3,489 Jan. 1−Dec. 31 Sales 153 Because of the increasing popularity of electronic video games, Parker Games continues to see a decline in the demand for board games. Sales prices have decreased by over 50% during the year. At the end of the year, Parker estimates the net realizable value of the 77 units of unsold inventory to be $330. Required: 1. Using FIFO, calculate ending inventory and cost of goods sold.

Answer 1

Under FIFO ,units acquired first are sold first so ending inventory is left from inventory purchased at last.

	Cost of ending inventory
Sep 17	43 Units * 7 unit cost = 301
Mar 12	34 units * 14 unit cost = 476
cost of ending inventory	77 units at total cost of 777

Cost of goods sold = Cost of goods available for sale -ending inventory

                      = 3489 - 777

                       = 2712

Now ,

Inventory should be value at lower of cost or market value

                      = Lower of 777 or 330

                       = $ 330

Adjusted cost of goods sold = 2712 + 447 inventory write off

                            = $ 3159

**Inventory write off = 777-330=447

Ending inventory	330
Cost of goods sold	3159