Question

Alta Ski Company's inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system.

Beginning inventory, January 1, 2021	1,300	units @ $95 each
Purchases:
January 15	2,700	units @ $110 each
January 21	2,500	units @ $115 each
Sales:
January 5	1,250	units @ $135 each
January 22	1,650	units @ $145 each
January 29	1,100	units @ $150 each
Ending inventory, January 31, 2021	2,500	units

Required:

1. 1a. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2021?

2. 1b. Which method will result in the highest ending inventory balance?

3. 2. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.

4. 3a. Assume that inventory costs were declining during January. The inventory purchased on January 15 had a unit cost of $85, and the inventory purchased on January 21 had a unit cost of $80. All other information is the same. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2021?

5. 3b. Which method will result in the highest ending inventory balance?

6. 3c. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.

Answer 1

Answer is given below with working