Question

Simple Plan Enterprises uses a periodic inventory system. Its records showed the following:

Inventory, December 31, using FIFO ? 38 Units @ $14 = $532

Inventory, December 31, using LIFO ? 38 Units @ $10 = $380

  

Transactions in the Following Year	Units			Unit Cost			Total Cost
Purchase, January 9		50		$	15			750
Purchase, January 20		100			16			1,600
Sale, January 11 (at $38 per unit)		80
Sale, January 27 (at $39 per unit)		56
1. Compute the number and cost of goods available for sale, the cost of ending inventory, and the cost of goods sold under FIFO and LIFO.    Fifo Lifo Number of Goods Available for sale (units) Costs of goods Available for sale Cost of ending Inventory Cost of Goods Sold 2. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods. (Round your answers to 2 decimal places.) Inventory Turnover ratio: Fifo: ? Lifo: ?

Answer 1

Answer 1.

FIFO:

Beginning Inventory = 38 units @ $14
Purchase, January 9 = 50 units @ $15
Purchase, January 20 = 100 units @ $16
Sales = 80 units @ $38 and 56 units @ $39

Number of Goods available for Sale (units) = 38 + 50 + 100
Number of Goods available for Sale (units) = 188

Cost of Goods available for Sale = 38 * $14 + 50 * $15 + 100 * $16
Cost of Goods available for Sale = $2,882

Cost of Goods Sold = 38 * $14 + 50 * $15 + 48 * $16
Cost of Goods Sold = $2,050

Cost of Ending Inventory = Cost of Goods available for Sale - Cost of Goods Sold
Cost of Ending Inventory = $2,882 - $2,050
Cost of Ending Inventory = $832

LIFO:

Beginning Inventory = 38 units @ $10
Purchase, January 9 = 50 units @ $15
Purchase, January 20 = 100 units @ $16
Sales = 80 units @ $38 and 56 units @ $39

Number of Goods available for Sale (units) = 38 + 50 + 100
Number of Goods available for Sale (units) = 188

Cost of Goods available for Sale = 38 * $10 + 50 * $15 + 100 * $16
Cost of Goods available for Sale = $2,730

Cost of Goods Sold = 100 * $16 + 36 * $15
Cost of Goods Sold = $2,140

Cost of Ending Inventory = Cost of Goods available for Sale - Cost of Goods Sold
Cost of Ending Inventory = $2,730 - $2,140
Cost of Ending Inventory = $590

Answer 2.

FIFO:

Average Inventory = ($532 + $832) / 2
Average Inventory = $682

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Inventory Turnover Ratio = $2,882 / $682
Inventory Turnover Ratio = 4.23 times

LIFO:

Average Inventory = ($380 + $590) / 2
Average Inventory = $485

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Inventory Turnover Ratio = $2,140 / $485
Inventory Turnover Ratio = 4.41 times