Question

Perpetual: Inventory costing with FIFO

A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 360 units. Ending inventory at January 31 totals 130 units.
  

	Units	Unit Cost
Beginning inventory on January 1	320	$	3.10
Purchase on January 9	70		3.30
Purchase on January 25	100		3.40

  
Required:
Assume the perpetual inventory system is used and then determine the costs assigned to ending inventory when costs are assigned based on the FIFO method.

A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 320 units. Ending inventory at January 31 totals 140 units.
  

	Units	Unit Cost
Beginning inventory on January 1	290	$	2.70
Purchase on January 9	70		2.90
Purchase on January 25	100		3.04

Required:
Assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on LIFO.

Answer 1

1)
	Cost of Ending innventory using FIFO method					$ 439.00
2)
	Cost of Ending innventory using LIFO method					$ 403.00
Workings:
					Units	Unit Cost		Total Cost
Beginning Inventory on January 1					320	$       3.10		$     992.00
Purchases on January 9					70	$       3.30		$     231.00
Purchases on January 25					100	$       3.40		$     340.00
Total cost of goods available for sale					490			$ 1,563.00
Under perpetual method, inventory records are updated as and when transaction place inrrespective of
periodic inventory method in which inventory records are updated at the end of period.
FIFO stands for First-in-First-Out.It means inventory which is bought first is recorded as sold first.
For calculating inventory cost at the end of period, cost of goods sold during the period is required.
Costs of goods sold of 360 Units is recorded as follows:
					Units	Unit Cost		Total Cost
Beginning Inventory on January 1					320	$       3.10		$     992.00
Purchases on January 9					40	$       3.30		$     132.00
Total cost of goods available for sale					360			$ 1,124.00
Now, Cost of ending inventory is recorded as follows:
Costs of goods avaolable for sale								$ 1,563.00
Less cost of goods sold								$ 1,124.00
Costs of Ending Inventory								$     439.00
LIFO Stands for Last-in-First-Out.It means inventories which are bought in last is recorded as sold first.
Costs of goods sold is recorded as follows:
					Units	Unit Cost		Total Cost
Beginning Inventory on January 1					190	$       3.10		$     589.00
Purchases on January 9					70	$       3.30		$     231.00
Purchases on January 25					100	$       3.40		$     340.00
Total cost of goods available for sale					360			$ 1,160.00
Cost of Ending Inventory is recordeda as follows:
Costs of goods available for sale								$ 1,563.00
Less Cost of goods sold								$ 1,160.00
Costs of ending Inventory								$     403.00