Question

Periodic Inventory by Three Methods; Cost of Merchandise Sold

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

Jan. 1	Inventory	30 units @ $104
Mar. 10	Purchase	70 units @ $116
Aug. 30	Purchase	30 units @ $124
Dec. 12	Purchase	70 units @ $130

There are 80 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 three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

Cost of Merchandise Inventory and Cost of Merchandise Sold
Inventory Method	Merchandise Inventory	Merchandise Sold
First-in, first-out (FIFO)	$	$
Last-in, first-out (LIFO)
Weighted average cost

Answer 1

• All working forms part of the answer
• Beginning Units + Purchased units = 200 units.
• Ending Units in inventory = 80 units.
• Hence, Units sold = 200 – 800 = 120 units.
• Working for all methods:

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	30	$     104.00	$         3,120.00	30	$       104.00	$           3,120.00	0	$      104.00	$                   -
Purchases:
10-Mar	70	$     116.00	$         8,120.00	70	$       116.00	$           8,120.00	0	$      116.00	$                   -
30-Aug	30	$     124.00	$         3,720.00	20	$       124.00	$           2,480.00	10	$      124.00	$      1,240.00
12-Dec	70	$     130.00	$         9,100.00		$       130.00	$                        -	70	$      130.00	$      9,100.00
TOTAL	200		$       24,060.00	120		$        13,720.00	80		$   10,340.00
LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	30	$     104.00	$         3,120.00	0	$       104.00	$                        -	30	$      104.00	$      3,120.00
Purchases:	0	$               -	$                      -
10-Mar	70	$     116.00	$         8,120.00	20	$       116.00	$           2,320.00	50	$      116.00	$      5,800.00
30-Aug	30	$     124.00	$         3,720.00	30	$       124.00	$           3,720.00	0	$      124.00	$                   -
12-Dec	70	$     130.00	$         9,100.00	70	$       130.00	$           9,100.00	0	$      130.00	$                   -
TOTAL	200		$       24,060.00	120		$        15,140.00	80		$      8,920.00
Weighted Average Method	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	30	$     104.00	$         3,120.00	120	$       120.30	$        14,436.00	80	$      120.30	$      9,624.00
Purchases:	0	$               -	$                      -
10-Mar	70	$     116.00	$         8,120.00
30-Aug	30	$     124.00	$         3,720.00
12-Dec	70	$     130.00	$         9,100.00
TOTAL	200	$     120.30 [24060 / 200]	$       24,060.00

• Answers, based on above workings:

Cost of Merchandise Inventory and Cost of Merchandise Sold
Inventory Method	Merchandise Inventory	Merchandise Sold
First-in, first-out (FIFO)	$ 10,340.00	$        13,720.00
Last-in, first-out (LIFO)	$    8,920.00	$        15,140.00
Weighted average cost	$    9,624.00	$            14,436.00