In: Accounting
Swifty Distribution markets CDs of numerous performing artists. At the beginning of March, Swifty had in beginning inventory 3,900 CDs with a unit cost of $7. During March, Swifty made the following purchases of CDs. March 5 4,875 @ $8 March 21 7,850 @ $10 March 13 6,825 @ $9 March 26 5,800 @ $11 During March 21,000 units were sold. Swifty uses a periodic inventory system.Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Round answers to 0 decimal places, e.g. 1,250. Use weighted-average unit cost rounded to 3 decimal places for computations.)
A) FIFO Method-
FIFO | |||||||||
Date | Purchase | Cost of goods sold | Inventory balance | ||||||
Units | $/Units | $ Total | Units | $/Units | $ Total | Units | $/Units | $ Total | |
Mar. 1 | Opening Balance | 3900 | 7 | 27300 | |||||
Mar. 5 | 4875 | 8 | 39000 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
Mar. 21 | 7850 | 10 | 78500 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
7850 | 10 | 78500 | |||||||
Mar. 13 | 6825 | 9 | 61425 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
7850 | 10 | 78500 | |||||||
6825 | 9 | 61425 | |||||||
Mar. 26 | 5800 | 11 | 63800 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
7850 | 10 | 78500 | |||||||
6825 | 9 | 61425 | |||||||
5800 | 11 | 63800 | |||||||
Cost of goods sold | 3900 | 7 | 27300 | 2450 | 9 | 22050 | |||
4875 | 8 | 39000 | 5800 | 11 | 63800 | ||||
7850 | 10 | 78500 | |||||||
4375 | 9 | 39375 | |||||||
Closing Balance | 2450 | 9 | 22050 | ||||||
5800 | 11 | 63800 |
Under the FIFO method, Closing Balance=8250Units for $85,850
Accuracy Test (Under FIFO)
Date | Units | Cost per unit (In $) | Total Cost (In $) |
Mar. 1 (Op. Inv.) | 3900 | 7 | 27300 |
Mar. 5 (Purc.) | 4875 | 8 | 39000 |
Mar. 21 (Purc.) | 7850 | 10 | 78500 |
Mar. 13 (Purc.) | 6825 | 9 | 61425 |
Mar. 26 (Purc.) | 5800 | 11 | 63800 |
Cost of goods available for sale | 29250 | 270025 | |
Less- Cost of goods sold | 21000 | 184175 | |
Ending Inventory | 8250 | 85850 |
B) LIFO Method-
Date | Purchase | Cost of goods sold | Inventory balance | ||||||
Units | $/Units | $ Total | Units | $/Units | $ Total | Units | $/Units | $ Total | |
Mar. 1 | Opening Balance | 3900 | 7 | 27300 | |||||
Mar. 5 | 4875 | 8 | 39000 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
Mar. 21 | 7850 | 10 | 78500 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
7850 | 10 | 78500 | |||||||
Mar. 13 | 6825 | 9 | 61425 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
7850 | 10 | 78500 | |||||||
6825 | 9 | 61425 | |||||||
Mar. 26 | 5800 | 11 | 63800 | 3900 | 7 | 27300 | |||
4875 | 8 | 39000 | |||||||
7850 | 10 | 78500 | |||||||
6825 | 9 | 61425 | |||||||
5800 | 11 | 63800 | |||||||
Cost of goods sold | 5800 | 11 | 63800 | 3900 | 7 | 27300 | |||
6825 | 9 | 61425 | 4350 | 8 | 34800 | ||||
7850 | 10 | 78500 | |||||||
525 | 8 | 4200 | |||||||
Closing Balance | 3900 | 7 | 27300 | ||||||
4350 | 8 | 34800 |
Under the LIFO method, Closing Balance=8250Units for $62,100
Accuracy Test (Under LIFO)
Date | Units | Cost per unit (In $) | Total Cost (In $) |
Mar. 1 (Op. Inv.) | 3900 | 7 | 27300 |
Mar. 5 (Purc.) | 4875 | 8 | 39000 |
Mar. 21 (Purc.) | 7850 | 10 | 78500 |
Mar. 13 (Purc.) | 6825 | 9 | 61425 |
Mar. 26 (Purc.) | 5800 | 11 | 63800 |
Cost of goods available for sale | 29250 | 270025 | |
Less- Cost of goods sold | 21000 | 207925 | |
Ending Inventory | 8250 | 62100 |
C) Weighted-average cost method-
Date | Purchase | Cost of goods sold | Inventory balance | AVERAGE-W. COST CALCULATION | AVERAGE-W. COST | ||||||
Units | $/Units | $ Total | Units | $/Units | $ Total | Units | $/Units | $ Total | |||
Mar. 1 | Opening Balance | 3900 | 7 | 27300 | 27300/3900 | 7 | |||||
Mar. 5 | 4875 | 8 | 39000 | 3900 | 7 | 27300 | 66300/8775 | 7.556 | |||
4875 | 8 | 39000 | |||||||||
Mar. 21 | 7850 | 10 | 78500 | 3900 | 7 | 27300 | 144800/16625 | 8.710 | |||
4875 | 8 | 39000 | |||||||||
7850 | 10 | 78500 | |||||||||
Mar. 13 | 6825 | 9 | 61425 | 3900 | 7 | 27300 | 206225/23450 | 8.794 | |||
4875 | 8 | 39000 | |||||||||
7850 | 10 | 78500 | |||||||||
6825 | 9 | 61425 | |||||||||
Mar. 26 | 5800 | 11 | 63800 | 3900 | 7 | 27300 | 270025/29250 | 9.232 | |||
4875 | 8 | 39000 | |||||||||
7850 | 10 | 78500 | |||||||||
6825 | 9 | 61425 | |||||||||
5800 | 11 | 63800 | |||||||||
Cost of goods sold | 21000 | 9.232 | 193872 | 8250 | 9.232 | 76164 | |||||
Closing Balance | 8250 | 9.232 | 76164 |
NOTE- AVERAGE-W. COST PER UNIT=TOTAL UNIT COST/ NO. OF UNITS.
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