Question

Assume that a retailer's beginning inventory and purchases of a popular item during January included (1) 300 units at $7 in beginning inventory on January 1, (2) 450 units at $8 purchased on January 8, and (3) 750 units at $9 purchased on January 29. The company sold 350 units on January 12 and 550 units on January 30.

Required:

1. Calculate the cost of goods sold for the month of January under (a) FIFO (periodic calculation), (b) FIFO (perpetual calculation), (c) LIFO (periodic calculation), and (d) LIFO (perpetual calculation).

Answer 1

Solution 1a:

Computation of COGS and ending inventory - Periodic FIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	300	$7.00	$2,100	300	$7.00	$2,100.00	0	$7.00	$0.00
Purchases:
8-Jan	450	$8.00	$3,600	450	$8.00	$3,600.00	0	$8.00	$0.00
29-Jan	750	$9.00	$6,750	150	$9.00	$1,350.00	600	$9.00	$5,400.00
Total	1500		$12,450	900		$7,050.00	600		$5,400.00

Solution 1b:

Computation of ending inventory COGS under FIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	300	$7.00	$2,100.00	0	$0.00	$0.00	0	$0.00	$0.00	300	$7.00	$2,100.00
8-Jan	300	$7.00	$2,100.00	450	$8.00	$3,600.00	0	$0.00	$0.00	300	$7.00	$2,100.00
										450	$8.00	$3,600.00
12-Jan	300	$7.00	$2,100.00	0	$0.00	$0.00	300	$7.00	$2,100.00	400	$8.00	$3,200.00
	450	$8.00	$3,600.00				50	$8.00	$400.00
29-Jan	400	$8.00	$3,200.00	750	$9.00	$6,750.00	0	$0.00	$0.00	400	$8.00	$3,200.00
										750	$9.00	$6,750.00
30-Jan	400	$8.00	$3,200.00	0	$0.00	$0.00	400	$8.00	$3,200.00	600	$9.00	$5,400.00
	750	$9.00	$6,750.00				150	$9.00	$1,350.00
Total							900		$7,050.00	600		$5,400.00

Solution 1c:

Computation of COGS and ending inventory - Periodic LIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	300	$7.00	$2,100	0	$7.00	$0.00	300	$7.00	$2,100.00
Purchases:
8-Jan	450	$8.00	$3,600	150	$8.00	$1,200.00	300	$8.00	$2,400.00
29-Jan	750	$9.00	$6,750	750	$9.00	$6,750.00	0	$9.00	$0.00
Total	1500		$12,450	900		$7,950.00	600		$4,500.00

Solution 1d:

Computation of ending inventory COGS under LIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	300	$7.00	$2,100.00	0	$0.00	$0.00	0	$0.00	$0.00	300	$7.00	$2,100.00
8-Jan	300	$7.00	$2,100.00	450	$8.00	$3,600.00	0	$0.00	$0.00	300	$7.00	$2,100.00
										450	$8.00	$3,600.00
12-Jan	300	$7.00	$2,100.00	0	$0.00	$0.00	350	$8.00	$2,800.00	300	$7.00	$2,100.00
	450	$8.00	$3,600.00							100	$8.00	$800.00
29-Jan	300	$7.00	$2,100.00	750	$9.00	$6,750.00	0	$0.00	$0.00	300	$7.00	$2,100.00
	100	$8.00	$800.00							100	$8.00	$800.00
										750	$9.00	$6,750.00
30-Jan	300	$7.00	$2,100.00	0	$0.00	$0.00	550	$9.00	$4,950.00	300	$7.00	$2,100.00
	100	$8.00	$800.00							100	$8.00	$800.00
	750	$9.00	$6,750.00							200	$9.00	$1,800.00
Total							900		$7,750.00	600		$4,700.00