Question

Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

Jan. 1	Inventory	1,065 units @ $120
Feb. 17	Purchase	1,440 units @ $122
July 21	Purchase	1,660 units @ $123
Nov. 23	Purchase	1,140 units @ $124

There are 1,215 units of the item in the physical inventory at December 31. The periodic inventory system is used.

a. Determine the inventory cost by the first-in, first-out method.
$fill in the blank 1

b. Determine the inventory cost by the last-in, first-out method.
$fill in the blank 2

c. Determine the inventory cost by the weighted average cost method. Do not round intermediate calculation and round final answer to the nearest whole dollar.
$fill in the blank 3

Answer 1

A. Total units available for sale = beginning inventory + all purchased units.

Total units available for sale = 5,305 units.

Ending inventory = 1,215 units.

Under FIFO method, it assumes that first available or purchased units are sold first. So the ending units consists of last purchased units.

Here, ending inventory of 1,215 units consists of 1,140 units from third purchase and balance 75 units from second purchase.

Ending inventory = ( 1,140 units x $ 124) + (75 units x $ 123)

Ending inventory = $ 150,585.

B. Under LIFO method, it assumes that last purchased items are sold out first. So ending inventory consists of 1,065 units from beginning inventory and 150 units from first purchase.

Ending inventory = (1,065 units x $ 120) + (150 units x $ 122)

Ending inventory = $ 146,100.

C. Under average method, average cost per unit is used to calculate the ending inventory.

Average cost per unit = total cost of units available for sale/total units available for sale.

Total cost of goods available for sale = (1,065 x $ 120) + ( 1,440 x $ 122) + (1,660 x $ 123) + ( 1,140 x $ 124)

Total cost of goods available for sale = $ 649,020

Total units available for sale = 5,305 units.

Average cost per unit = 649,020/5,305

Average cost per unit = $ 122.341

Ending inventory = 1,215 units x $ 122.341

Ending inventory = $ 148,645

SUMMARY:

All requirements have been provided.