Question

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.

Answer 1

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