Question

Seltzer Corporation sells Item A as part of its product line. Information as to balances on hand,

purchases, and sales of Item A are given in the following table for the first six months of 2018.

                                                                                                  

                                                                                              Ending Inventory   Unit Price

                 Date             Units Purchased        Units Sold          Balance             of Purchase

              January 1                --------                  --------                   400                     $4.00                                                                  

              January 24               1,600                   --------                2,000                     $6.00  

              February 8              --------                     300                  1,700                     --------

              March 16                --------                     700                  1,000                     --------

              June 11                    1,000                    --------               2,000                     $8.00

Instructions:

Compute the ending inventory and cost of goods sold under each of the following inventory methods. Please show your work for full credit.

(a) FIFO (periodic).

(b) LIFO (periodic).

(c) Weighted-average (periodic).

(d) FIFO (perpetual).

(e) LIFO (perpetual).

(f) Moving-average (perpetual).

Answer 1

	Date	Units Purchased	Units Sold	Balance	Unit price of purchase
	01-Jan			400	$4
	24.01	1600		2000	$6
	8.02		300	1700
	16.03		700	1000
	11.06	1000		2000	$8
	total	2600	1000
	(1) If Seltzer Corporation uses periodic inventory method:
	Ending inventory in units = Beginning inventory + Purchases – Sales
			= 400+2600-1000 = 2000 UNITS
	a. FIFO method: [PERIODIC}
	Cost of Closing Inventory
	Most recent
	11.06 = 1000 units@$8			$                     8,000.00
	24.01= 1000 units@$6			$                     6,000.00
				$                   14,000.00
	Cost of goods sold under periodic-FIFO
	Cost of inventory on 01/Jan (opening Inventory)				$1,600	[400*$4]
	Add: Cost of inventory purchased during the year				$17,600	[1600*$6+1000*$8]
	Total Cost ofunit available for sale				$19,200
	Less: Cost of unit of ending inventory				$ 14,000.00
	Total Cost of 1000 units sold				$5,200
	b. LIFO method: [PERIODIC}
	Cost of Closing Inventory
	Most Earliest
	01.01 = 400 units$4			$                     1,600.00
	24.01= 600 units@$6			$                     3,600.00
	11.06 = 1000 units@$8			$                     8,000.00
				$                   13,200.00
	Cost of inventory on 01/Jan (opening Inventory)				$1,600	[400*$4]
	Add: Cost of inventory purchased during the year				$17,600	[1600*$6+1000*$8]
	Total Cost ofunit available for sale				$19,200
	Less: Cost of unit of ending inventory				$ 13,200.00
	Total Cost of 1000 units sold				$6,000
	c.Weighted Average cost flow
			Quantity	Price/Cost
	01-01	Openin	400	$                             4.00	$    1,600.00
	24-02	Purchase	1600	$                             6.00	$    9,600.00
	02-Apr	Purchase	1000	$                             8.00	$    8,000.00
			3000		$ 19,200.00
		Weighted Avg Cost = Total Cost/total unit purchased
			=19200/300
			6.4	$/unit
	Weighted AvgCOGS = Avg Cost p.u * Units Sold
		= $6.4*1000 units = $6400
	Cost of Closing Inventory
		= $6.4*2000 units = $12800
d	Cost of goods sold under perpetual-FIFO
		Purchases			COST OF GOODS SOLD			Closing Stock
		QTY	RATE	Amt	QTY	RATE	Amt	QTY	RATE	Amt
	01-Jan	400	4	1600				400	4	1600
	24-Feb	1600	6	9600				400	4	1600
								1600	6	9600
	08-Feb				300	4	1200	100	4	400
								1600	6	9600
	16-Mar				100	4	400	1000	6	6000
					600	6	3600
	11-Jun	1000	8	8000				1000	6	6000
								1000	8	8000
	TOTAL	3000	18	19200	1000		5200			14000
		COGS == $5200
		Cost of closing Inventory = $14000
e	Cost of goods sold under perpetual-LIFO
		Purchases			COST OF GOODS SOLD			Closing Stock
		QTY	RATE	Amt	QTY	RATE	Amt	QTY	RATE	Amt
	01-Jan	400	4	1600				400	4	1600
	24-Feb	1600	6	9600				400	4	1600
								1600	6	9600
	08-Feb				300	6	1800	400	4	1600
								1300	6	9600
	16-Mar				700	6	4200	400	4	1600
								600	6	3600
	11-Jun	1000	8	8000				400	4	1600
								600	6	3600
								1000	8	8000
	TOTAL	3000	18	19200	1000		6000			13200
		COGS == $6000
		Cost of closing Inventory = $13200
f	Perpetual System - Moving Average Cost Flow
		Purchases			COST OF GOODS SOLD			Closing Stock
		QTY	RATE	Amt	QTY	RATE	Amt	QTY	RATE	Amt
	01-Jan	400	4	1600				400	4	1600
	24-Feb	1600	6	9600				2000	5.6	11200
	08-Feb				300	5.6	1680	1700	5.6	9520
	16-Mar				700	5.6	3920	1000	5.6	5600
	11-Jun	1000	8	8000				2000	6.8	13600
	TOTAL	3000	18	19200	1000		5600			13600
		COGS == $5600
		Cost of closing Inventory = $13600