Question

Yang Corporation uses the periodic inventory system. The following sales and purchases of the same product were made during 20x1 at Yang Corporation. The opening inventory consisted of 50 units at $2 each.

	Purchases			Sales
Date	Units	$ per unit		Date	Units	Unit $Price	Total
March 15	200	3		April 25	250*	5
June 15	600	5		June 30	500**	6

*for specific identification, sold 50 units of opening inventory and 200 units of March 15 purchase

**for specific identification, sold 500 units of June 15 purchase

Requirements:

1. Calculate cost of goods sold and the cost of ending inventory under FIFO, LIFO, specific identification, and weighted average inventory cost flow assumptions. Use the student template #1

2. Calculate and compare the effect on profit of the four inventory cost flow assumptions.

ACT300 Principles of Accounting I
Module 4: Critical Thinking Template Option #1
	FIFO	Units	Cost per unit	Sale per Unit	Totals
	Beginning Inventory	-	$0.00	$0.00	$0
	Purchases and Sales
	Mar 15-Purchase	-	$0.00	$0.00	$0		Data from the problem
	April 25-Sale	-	$0.00	$0.00	0		The opening inventory consisted of 50 units at $2 each.
	Jun 15-Purchase	-	$0.00	$0.00	0
	Jun 30-Sale	-	$0.00	$0.00	0			Purchases			Sales
	Cost of Goods Available for Sale	-	$0.00	$0.00	$0		Date	Units	$ per unit		Date	Units	Unit $Price
	Cost of Goods Sold (COGS)	-	$0.00	$0.00	0		15-Mar	200	3		25-Apr	250*	5
	Ending Inventory	-	$0.00	$0.00	$0		15-Jun	600	5		30-Jun	500**	6
	COGS Calculation	Units	COGS	SalesTotals	Gross Profit
	Beginning Inventory	-	$0.00	$0.00	$0
	Purchases - Mar 15	-	$0.00	$0.00	$0
	Sale - April 25	-	$0.00	$0.00	$0
	Purchases - June 15		$0.00	$0.00	$0
	Sale - June 30		$0.00	$0.00	$0
			.	.
	Totals	-	$0.00	$0.00	$0

Answer 1

1...Since it's periodic inventory
Calculations are made at the year-end only , as follows as per
FIFO cost flow assumption:
	Units	Total cost
Goods available for sale(50+200+600)	850	3700	(100+600+3000)
Less:Ending Inventory (under this assumption)	100	500	(Last purchase)
Cost of goods sold	750	3200
Sale Value (250+500)	750	4250	(250*5)+(500*6)
Gross profit		1050
LIFO cost flow assumption:
	Units	Total cost
Goods available for sale(50+200+600)	850	3700	(100+600+3000)
Less:Ending Inventory (under this assumption)	100	250	(50*2)+(50*3)
Cost of goods sold	750	3450
Sale Value (250+500)	750	4250	(250*5)+(500*6)
Gross profit		800
Wt. Av.cost flow assumption:
	Units	Total cost
Goods available for sale(50+200+600)	850	3700	(100+600+3000)
Less:Ending Inventory (under this assumption)	100	435	(3700/850)*100
Cost of goods sold	750	3265
Sale Value (250+500)	750	4250	(250*5)+(500*6)
Gross profit		985
Specific Identity cost flow assumption:
	Units	Total cost
Goods available for sale(50+200+600)	850	3700	(100+600+3000)
Less:Ending Inventory (under this assumption)	100	500	(Sale identified)
Cost of goods sold(50+200+500)	750	3200	(50*2)+(200*3)+(500*5)
Sale Value (250+500)	750	4250	(250*5)+(500*6)
Gross profit		1050

2…
Cost flow assumption	Ending Inventory	COGS	Gross Profit
FIFO	500	3200	1050
LIFO	250	3450	800
Wt. Av.	435	3265	985
Specific Identity	500	3200	1050
LIFO gives the least gross profit as COGS are valued at the latest prices.