Question

P6-9A Terando Co. began operations on July 1. It uses a perpetual inventory system. During July, the company had the following purchases and sales. July 1. Units 5 Unit Cost $120 Sales July 6. Sales Units 4 July 11. Units 7 Unit Cost $136 July 14. Sales Units 3 July 21. Units 8 Unit Cost $147 July 27. Sales units 6 a) Determine the ending inventory under a perpetual inventory system using (1) FIFO, (2) moving-average cost, and (3) LIFO. b) Which costing method produces the highest ending inventory valuation?

Answer 1

a)

		Ending inventory
1	FIFO	$                     1,029
2	Moving-average cost	$                        994
3	LIFO	$                        958

Working:

Perpetual FIFO
Date	Purchases			Cost of Goods Sold			Inventory on Hand
	QTY	Unit Cost	Tot. Cost	QTY	Unit Cost	Tot. Cost	QTY	Unit Cost	Tot. Cost
Jul. 1	5	120	600				5	120	600
Jul. 6				4	120	480	1	120	120
Jul. 11	7	136	952				1	120	120
							7	136	952
Jul. 14				1	120	120
				2	136	272	5	136	680
Jul. 21	8	147	1176				5	136	680
							8	147	1176
Jul. 27				5	136	680
				1	147	147	7	147	1029
Total	20		2728	13		1699	7		1029
Perpetual Moving-Average Cost
Date	Purchases			Cost of Goods Sold			Inventory on Hand
	QTY	Unit Cost	Tot. Cost	QTY	Unit Cost	Tot. Cost	QTY	Unit Cost	Tot. Cost
Jul. 1	5	120	600				5	120	600
Jul. 6				4	120	480	1	120	120
Jul. 11	7	136	952				8	134	1072
Jul. 14				3	134	402	5	134	670
Jul. 21	8	147	1176				13	142	1846
Jul. 27				6	142	852	7	142	994
Total	20		2728	13		1734	7		994
Perpetual LIFO
Date	Purchases			Cost of Goods Sold			Inventory on Hand
	QTY	Unit Cost	Tot. Cost	QTY	Unit Cost	Tot. Cost	QTY	Unit Cost	Tot. Cost
Jul. 1	5	120	600				5	120	600
Jul. 6				4	120	480	1	120	120
Jul. 11	7	136	952				1	120	120
							7	136	952
Jul. 14				3	136	408	1	120	120
							4	136	544
Jul. 21	8	147	1176				1	120	120
							4	136	544
							8	147	1176
Jul. 27				6	147	882	1	120	120
							4	136	544
							2	147	294
Total	20		2728	13		1770	7		958

b) FIFO