Question

Altira Corporation uses a periodic inventory system. The following information related to its merchandise inventory during the month of August 2018 is available:

Aug.1	Inventory on hand—7,000 units; cost $8.10 each.
8	Purchased 20,000 units for $6.50 each.
14	Sold 15,000 units for $13.00 each.
18	Purchased 11,000 units for $6.00 each.
25	Sold 14,000 units for $12.00 each.
31	Inventory on hand—9,000 units.

Required:
Determine the inventory balance Altira would report in its August 31, 2018, balance sheet and the cost of goods sold it would report in its August 2018 income statement using each of the following cost flow methods:

Answer 1

• All working forms part of the answer
• Beginning Inventory + Purchases = 38000 units
• Sold Inventory = 15000 + 14000 = 29000 units
• Ending Inventory = 38000 – 29000 = 9000 units.
• Ending Inventory Value and Cost of Goods Sold for each of the three method is calculated below:

----Please follow “Cost of Goods Sold” column and “Ending Inventory” column for answer values---

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	7000	$       8.10	$       56,700.00	7000	$       8.10	$        56,700.00	0	$       8.10	$                   -
Purchases:
08-Aug	20000	$       6.50	$   1,30,000.00	20000	$       6.50	$     1,30,000.00	0	$       6.50	$                   -
18-Aug	11000	$       6.00	$       66,000.00	2000	$       6.00	$        12,000.00	9000	$       6.00	$   54,000.00
TOTAL	38000		$   2,52,700.00	29000		$     1,98,700.00	9000		$   54,000.00
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	7000	$       8.10	$       56,700.00	0	$       8.10	$                        -	7000	$       8.10	$   56,700.00
Purchases:
08-Aug	20000	$       6.50	$   1,30,000.00	18000	$       6.50	$     1,17,000.00	2000	$       6.50	$   13,000.00
18-Aug	11000	$       6.00	$       66,000.00	11000	$       6.00	$        66,000.00	0	$       6.00	$                   -
TOTAL	38000		$   2,52,700.00	29000		$     1,83,000.00	9000		$   69,700.00
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	7000	$       8.10	$       56,700.00
Purchases:
08-Aug	20000	$       6.50	$   1,30,000.00
18-Aug	11000	$       6.00	$       66,000.00
TOTAL	38000	6.65	$   2,52,700.00	29000	6.65	$     1,92,850.00	9000	$       6.65	$   59,850.00