Question

Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its inventory costing method perpetually at the time of each sale, as if it uses perpetual inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions	Units			Unit Cost
a. Inventory, Beginning		300		$	14
For the year:
b. Purchase, April 11		850			12
c. Purchase, June 1		750			15
d. Sale, May 1 (sold for $42 per unit)		300
e. Sale, July 3 (sold for $42 per unit)		540
f. Operating expenses (excluding income tax expense), $19,200

Required:

Calculate the cost of ending inventory and the cost of goods sold using the FIFO and LIFO methods.

Answer 1

ANSWER:

	FIFO	LIFO
COST OF GOODS SOLD	$10,680	$14,970
ENDING INVENTORY	$11,700	$13,950

CALCULATIONS:

FIFO	Purchases					Cost of goods sold					Ending inventory
	Units	x	Cost/Unit	=	Total Cost	Units	x	Cost/Unit	=	Total Cost	Units	x	Cost/Unit	=	Total Cost
Inventory, Beginning											300	x	$14	=	$4,200
Purchase, April 11	850	x	$12	=	$10,200						300	x	$14	=	$4,200
											850	x	$12	=	$10,200
Sale, May 1:
From Inventory, Beg.						300	x	$14	=	$4,200	850	x	$12	=	$10,200
Purchase, June 1	750	x	$15	=	$11,250						850	x	$12	=	$10,200
											750	x	$15	=	$11,250
Sale, July 3:
From Purchase, April 11						540	x	$12	=	$6,480	310	x	$12	=	$3,720
											750	x	$15	=	$11,250
Total	1600				$21,450	840				$10,680	1060				$14,970
																LIFO	Purchases					Cost of goods sold					Ending inventory
Units	x	Cost/Unit	=	Total Cost	Units	x	Cost/Unit	=	Total Cost	Units	x	Cost/Unit	=	Total Cost
Inventory, Beginning											300	x	$14	=	$4,200
Purchase, April 11	850	x	$12	=	$10,200						300	x	$14	=	$4,200
											850	x	$12	=	$10,200
Sale, May 1:
From purchase, April 11						300	x	$12	=	$3,600	300	x	$14	=	$4,200
											550	x	$12	=	$10,200
Purchase, June 1	750	x	$15	=	$11,250						300	x	$14	=	$4,200
											550	x	$12	=	$6,600
											750	x	$15	=	$11,250
Sale, July 3:
From Purchase, June 1						540	x	$15	=	$8,100	300	x	$14	=	$4,200
											550	x	$12	=	$6,600
											210	x	$15	=	$3,150
Total	1600				$21,450	840				$11,700	1060				$13,950