Question

Carlson Auto Dealers Inc. sells a handmade automobile as its only product. Each automobile is identical; however, they can be distinguished by their unique ID number. At the beginning of 2021, Carlson had three cars in inventory, as follows: 

Car ID..................Cost 

203.......................$60,000 

207........................60,000 

210........................63,000 

During 2021, each of the three autos sold for $90,000. Additional purchases (listed in chronological order) and sales for the year were as follows: 

 

Required: 

1. Calculate 2021 ending inventory and cost of goods sold assuming the company uses the specific identification inventory method. 

2. Calculate ending inventory and cost of goods sold assuming FIFO and a periodic inventory system. 

3. Calculate ending inventory and cost of goods sold assuming LIFO and a periodic inventory system. 

4. Calculate ending inventory and cost of goods sold assuming the average cost method and a periodic inventory system.

Answer 1

1). Computation of 2011 ending inventory and cost of goods sold under specific identification:

 

Cost of goods sold:

Cost of goods sold = Beginning inventory + Purchases – Ending inventory

Beginning inventory
203	$60,000
207	$60,000
210	$63,000
Total	$183,000

Purchases
211	63,000
212	63,000
213	64,500
214	66,000
215	69,000
216	70,500
217	72,000
218	72,300
219	75,000
Total	615,300

Ending inventory
213	64,500
216	70,500
219	75,000
Total	$210,000

 

Cost of goods sold = $183,000 + $615,300 - $210,000

Cost of goods sold = $588,300

Therefore, cost of goods sold is $588,300.

Ending inventory is $210,000.

 

2). Computation 2011 ending inventory and cost of goods sold under FIFO:

Cost of goods available for sale is $798,300

 

Ending inventory:

.

Ending inventory
219	75,000
218	72,300
217	72,000
Total	$219,300

Cost of goods sold = $798,300 - $219,300

Cost of goods sold = $579,300

Therefore, cost of goods sold is $579,300

Ending inventory is $219,300

 

3). Calculate 2011 ending inventory and cost of goods sold under LIFO:

Cost of goods available for sale is $798,300

 

Ending inventory:

.

Ending inventory
203	$60,000
207	$60,000
210	$63,000
Total	$183,000

 

Cost of goods sold = $798,300 - $183,000

Cost of goods sold = $615,300

Therefore, cost of goods sold is $615,300

Ending inventory is $183,000

 

4. Calculate 2011 ending inventory and cost of goods sold under Average costing:

Cost of goods available for sale is $798,300

Number of units 12

 

Weighted average unit cost = Cost of goods available for sale/Number of units

Weighted average unit cost = $978,300/12

Weighted average unit cost = $66,525

Ending inventory = 3 × $66,525

= $199,575

 

Therefore, cost of goods sold is = $798,300 - $199,575

= $598,725

Therefore, cost of goods sold is = $798,300 - $199,575

= $598,725