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 @ $92
Mar. 10	Purchase	70 units @ $104
Aug. 30	Purchase	30 units @ $108
Dec. 12	Purchase	70 units @ $112

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.

Answer 1

Solution

	Cost of Ending inventory	Merchandise sold
FIFO	$                 8,920	$                 12,900
LIFO	$                 7,840	$                 13,980
Weighted average	$                 8,728	$                 13,092

Working

	Units	Cost per unit	value
Beginning Balance	30	$                   92.00	$ 2,760
Purchases
	70	$                 104.00	$ 7,280
	30	$                 108.00	$ 3,240
	70	$                 122.00	$ 8,540
Total	200		$ 21,820

.

Average Cost of Inventory
Units	(A)	200
Total Cost	(B)	$ 21,820
Average Cost	(C=B/A)	$                 109.10

.

FIFO
Total Units Avalable for sale		200
Units Sold		120
Closing Stock in Units		80
Valuation
Ending Inventory	70	@	$           112.00	$ 7,840
	10	@	$           108.00	$ 1,080
Value Of Ending Inventory				$              8,920
Cost of Goods sold				$            12,900
LIFO
Total Units Avalable for sale		200
Units Sold		120
Closing Stock in Units		80
Valuation
Ending Inventory	40	@	$             92.00	$ 3,680
	40	@	$           104.00	$ 4,160
Value Of Ending Inventory				$              7,840
Cost of Goods sold				$            13,980
Weighted Average method
Total Units Avalable for sale		200
Units Sold		120
Closing Stock in Units		80
Valuation
Ending Inventory	80	@	$           109.10	$              8,728
Value Of Ending Inventory				$              8,728
Cost of Goods sold	(Total Purchase and opening stock Minus Closing Stock)			$ 13,092