Question

periodic inventory by three methods;cost of merchandise sold

The units of an item available for sale during the year were as follows:

Jan1. inventory 1,800 units at $108, Mar,10. purchases 2,240 units at $110,

Aug. 30 purchase 2,000 units at $116. Dec. 12 purchase 1,960 units at $120.

there are 2,000 units of the item in the physical inventory at december 31. the periodic inventory system is used.

Determine the inventory cost and the cost of merchandise sold by the methods.

Answer 1

Under FIFO Method
Particulars	Amt. in $	Workings
Opening Inventory- 1800 units @ $108 (A)	194400	1800*108
Add:- Purchases made during the year
On Mar 10, 2240 units @ $110	246400	2240*110
On Aug 30, 2000 units @ $116	232000	2000*116
On Dec 12, 1960 units @ $120	235200	1960*120
Purchases Total (B)	713600
Cost of Goods sold-6000 units (C )	668160	(1800*108)+(2240*110)+(1960*116)
Closing inventory 2000 units (A+B-C)	239840

Under LIFO Method
Particulars	Amt. in $	Workings
Opening Inventory- 1800 units @ $108 (A)	194400	1800*108
Add:- Purchases made during the year
On Mar 10, 2240 units @ $110	246400	2240*110
On Aug 30, 2000 units @ $116	232000	2000*116
On Dec 12, 1960 units @ $120	235200	1960*120
Purchases Total (B)	713600
Cost of Goods sold-6000 units (C )	691600	(1960*120)+(2000*116)+(2040*110)
Closing inventory 2000 units (A+B-C)	216400

Under Average cost Method
Particulars	Amt. in $	Workings
Opening Inventory- 1800 units @ $108 (A)	194400	1800*108
Add:- Purchases made during the year
On Mar 10, 2240 units @ $110	246400	2240*110
On Aug 30, 2000 units @ $116	232000	2000*116
On Dec 12, 1960 units @ $120	235200	1960*120
Purchases Total (B)	713600
Cost of Goods sold-6000 units (C )	681000	[(713600+194400)/(8000)]*6000
Closing inventory 2000 units (A+B-C)	227000

*NOTE:-Units sold=1800+2240+2000+1960-2000=6000 units