Question

Tipp Topp Company reports the following for the month of June. Units Unit Cost Total Cost June 1 Inventory 300 $5 $1,500 12 Purchase 450 6 2,700 23 Purchase 750 7.60 5,700 30 Inventory 160

Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and (2) LIFO. FIFO LIFO Ending inventory $ $ Cost of goods sold $ $ LINK TO TEXT

Compute the cost of the ending inventory and the cost of goods sold using the average-cost method. (Round per unit cost calculations to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 125.) Ending inventory $ Cost of goods sold $

Answer 1

(1) FIFO

DATE	PURCHASE	UNITS	UNIT COST	TOTAL COST
JUNE 1	BEGINNING INVENTORY	300 UNITS	$5	$1,500
JUNE 12	PURCHASE	450 UNITS	$6	$2,700
JUNE 23	PURCHASE	750 UNITS	$7.60	$5,700
	GOODS AVAILABLE FOR SALE	1500 UNITS		$9,900

ENDING INVENTORY 160 UNIS THIS WILL BE FROM JUNE 23 PURCHASE BECAUSE IN FIFO METHOD THE UNITS PURCHASE FIRST WILL BE SOLD FIRST, HENCE

ENDING INVENTORY = 160 UNITS* $7.60 =$1,216

COST OF GOODS SOLD = GOODS AVAILABLE FOR SALE - ENDING INVENTORY

= $9,900 - $1,216

= $8,684

(2)LIFO METHOD:

IN LIFO METHOD ENDING INVENTORY 160 UNIS THIS WILL BE FROM JUNE 1 BEGINNING INVENTORY BECAUSE IN FIFO METHOD THE UNITS PURCHASE LAST WILL BE SOLD FIRST, HENCE

ENDING INVENTORY = 160 UNITS* $5 =$800

COST OF GOODS SOLD = GOODS AVAILABLE FOR SALE - ENDING INVENTORY

=$9,900 - $800

= $9,100

(3)AVERAGE COST

IN AVERAGE COST COST WILL CALCULATED ON THE BASIS OF AVERAGE COST PER UNIT:

AVERAGE COST PER UNIT = TOTAL COST OF GOODS AVAILABLE FOR SALE/NO OF UNITS AVAILABLE FOR SALE

= $9,900/1,500 UNITS

=$6.60 PER UNIT

ENDING INVENTORY = 160 UNITS * $6.60 = 1,056

COST OF GOODS SOLD = (1500 UNITS - 160 UNITS ) *6.60 = $8,844