Question

Computing Cost of Sales and Ending Inventory
Stocken Company has the following financial records for the current period.

	Units	Unit Cost
Beginning Inventory	100	$ 46
Purchases: #1	650	42
#2	550	38
#3	200	36

Ending inventory is 350 units. Compute the ending inventory and the cost of goods sold for the current period using (a) first-in, first out, (b) average cost, and (c) last-in, first out.

(a) First-in, first-out
Ending inventory	$Answer
Cost of goods sold	$Answer
(b) Average cost
Ending inventory	$Answer
Cost of goods sold	$Answer
(c) Last-in, first-out
Ending inventory	$Answer
Cost of goods sold	$Answer

Answer 1

	Units	Unit Cost	Total Cost
Opening Inventory	100	46	4,600
Purchases #1	650	42	27,300
#2	550	38	20,900
#3	200	36	7,200
Total	1,500		60,000

Closing Inventory = 350 Units

Sales = (Opening + Purchases) – Closing

= 1,500 Units (Calculated above) – 350

Sales = 1,150 Units

1.

According to FIFO, we will sell units which came first first i.e. It means units which we have or purchases first will get sold first.

In question Sales = 1150 units that means Company first sell 100 units of Opening Inventory then 650 units of purchases #1 and 400 Units of Purchases #2.

Cost of Goods sold = 100 Units of Opening Inventory + 650 units of purchases #1 + 400 Units of Purchases #2

= 4,600 + 27,300 + (400 units * $38)

Cost of Goods sold = 47,100

Closing Inventory = Total Cost – Cost of Goods sold

= 60,000 – 47,100

Closing Inventory = $12,900

2.

Average Cost = Total Cost / Total Units

= $60,000 / 1,500 Units

Average Cost = $40 per unit

Cost of Goods Sold = 1,150 Units *$40 per unit

Cost of Goods Sold = $46,000

Closing Inventory = Total Cost – Cost of Goods Sold

= 60,000 – 46,000

Closing Inventory = $14,000

3.

According to LIFO, we will sell units which came last first i.e. It means units which we have or purchases last will get sold first.

In question Sales = 1150 units that means Company first sell 100 units of Opening Inventory then 650 units of purchases #1 and 400 Units of Purchases #2.

Cost of Goods sold = 200 units of purchases #3 + 550 Units of Purchases #2 + 400 units of Purchases #1

= 7,200 + 20,900 + (400 units * $42)

Cost of Goods sold = $44,900

Closing Inventory = Total Cost – Cost of Goods sold

= 60,000 – 44,900

Closing Inventory = $15,100