Question

In: Accounting

SimpsonSimpson ​Company's inventory records for the most recent year contain the following​ data: Quantity Unit Cost...

SimpsonSimpson ​Company's inventory records for the most recent year contain the following​ data:

Quantity Unit Cost

Beginning inventory 2,000 $8.00

Purchases during year 18,000 $10.00

Simpson Company sold a total of 19,800 units during this year.

1. Using the average- cost method, compute the cost of goods sold and the ending inventory of the year.

2. Using the FIFO method, compute the cost of goods sold and the ending inventory of the year.

3. Using the LIFO method, compute the cost of goods sold and the ending inventory of the year

Solutions

Expert Solution

Cost of goods available for sale = 2,000 * $8.00 + 18,000 * $10.00
Cost of goods available for sale = $196,000

Number of units available for sale = 2,000 + 18,000
Number of units available for sale = 20,000

Answer 1.

Cost per unit = Cost of goods available for sale / Number of units available for sale
Cost per unit = $196,000 / 20,000
Cost per unit = $9.80

Number of units sold = 19,800

Cost of goods sold = $9.80 * 19,800
Cost of goods sold = $194,040

Ending inventory = Cost of goods available for sale - Cost of goods sold
Ending inventory = $196,000 - $194,040
Ending inventory = $1,960

Answer 2.

FIFO:

Cost of goods sold = 2,000 * $8.00 + 17,800 * $10.00
Cost of goods sold = $194,000

Ending inventory = Cost of goods available for sale - Cost of goods sold
Ending inventory = $196,000 - $194,000
Ending inventory = $2,000

Answer 3.

LIFO:

Cost of goods sold = 1,800 * $8.00 + 18,000 * $10.00
Cost of goods sold = $194,400

Ending inventory = Cost of goods available for sale - Cost of goods sold
Ending inventory = $196,000 - $194,400
Ending inventory = $1,600


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