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Periodic and Perpetual Systems—Calculating Ending Inventory and Cost of Sales using Average Cost (Moving Average), FIFO,...

Periodic and Perpetual Systems—Calculating Ending Inventory and Cost of Sales using Average Cost (Moving Average), FIFO, and LIFO

Undew Inc.’s inventory records showed the following data for an item it sells regularly.

Date Units Unit Cost
Jan 1 Inventory 2,000 $10.00
Jan 3 Purchases 18,000 10.40
Jan 7 Sales (at $26 per unit) 7,000
Jan 20 Purchases 6,000 11.00
Jan 22 Sales (at $27 per unit) 16,000
Jan 30 Purchases 3,000 12.00

a. Assuming that Undew maintains a periodic inventory system, compute ending inventory and cost of goods sold for the month-ended January 31 using (1) average cost, (2) FIFO, and (3) LIFO.

Note: Round your final answers only to the nearest dollar.

Note: Do not round the cost per unit amounts in your calculations.

Perpetual Inventory System Ending Inventory COGS
1. Average cost method.
2. FIFO method.
3. LIFO method.

b. Assuming that Undew maintains a perpetual inventory system, compute ending inventory and cost of goods sold for the month-ended January 31 using (1) moving average, (2) FIFO, and (3) LIFO.

Note: Round your final answers only to the nearest dollar.

Note: Do not round the cost per unit amounts in your calculations.

Perpetual Inventory System Ending Inventory COGS
1. Moving average method.
2. FIFO method.
3. LIFO method.

Solutions

Expert Solution

a) Periodic System

Weighted Average

Average cost per unit = $309,200 / 29000 = $10.66

Ending inventory = 6000 x $10.66 = $63,972

Cost of Goods sold = 23000 x $10.66 = $245,228

FIFO

Ending Inventory
Date units Per unit Total
20-Jan 3000 $11 $33,000
30-Jan 3000 $12 $36,000
Total 6000 $69,000
Cost of Goods sold
Date units Per unit Total
1-Jan 2000 $10 $20,000
3-Jan 18000 $10.4 $187,200
20-Jan 3000 $11 $33,000
Total 23000 $240,200

b) LIFO

Ending Inventory
Date units Per unit Total
1-Jan 2000 $10 $20,000
3-Jan 4000 $10.4 $41,600
Total 6000 $61,600
Cost of Goods sold
Date units Per unit Total
3-Jan 14000 $10.4 $145,600
20-Jan 6000 $11.0 $66,000
30-Jan 3000 $12 $36,000
Total 23000 $247,600
Periodic system Ending inventory COGS
Average cost method $63,972 $245,228
FIFO $69,000 $240,200
LIFO $61,600 $247,600

B) Perpetual System

Perpetual system Ending inventory COGS
Average cost method $67,686 $241,514
FIFO $69,000 $240,200
LIFO $66,400 $242,800

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