In: Accounting
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 |
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