In: Accounting

# FIFO & LIFO periodic inventory system

Below is the information relating to Montel purchases of snowboards during september ,during the same month 120 snoeboards were sold .Montel uses periodic inventory system.

 Date Transaction Unit unit cost 1-Sep Inventory 20 $100.00 12-Sep Purchase 45$103.00 19-Sep Purchase 20 $104.00 26-Sep Purchase 50$105.00

Compute the ending Inventory under FIFO and LIFO method and Cost of Goods sold.

What you notice about in the both method regarding Cost of Goods sold and ending inventory

## Solutions

##### Expert Solution

a).  Ending inventory using FIFO method =$1,575 Cost of goods sold for FIFO=$12,390

ai) Ending inventory using LIFO =$1,500 Cost of goods sold for LIFO =$12,465

b). Sum of Ending inventory and cogs for FIFO= $13,965 bii). sum of ending inventory and cogs for LIFO =$13,965

EXAPLANATION:

FIFO stands for  “first in first out” and simply means you need to label your food with the dates you store them, and put the older foods in front or on top so that you use them first. This system allows you to find your food quicker and use them more efficiently.

LIFO on the other hand stands for The Last-In, First-Out (LIFO) method assumes that the last unit to arrive in inventory or more recent is sold first.

so:-

Solution for part (a) with FIFO method

FIFO-goods purchase first are sold first;

ai). Ending inventory=Total units-sales unit

given :

total cost=135 units

sales units =120

hence;

ending inventory  =135-120

=15 units

value of ending inventory=ending inventory *purchases

= 15*105

=$1,575 aii). Cost of goods sold; = (20*100) + (45*103) + (20*104)+ (35*105) cost of goods sold = 2000+4635 +2080 +3675 =$12,390

Solution for part (a) with LIFO method:

LIFO-Goods purchased last are sold first;

so;

ai) Ending inventory =15 units

value of ending inventory = 15*100

= $1,500 aii). Cost of goods sold; (5*100) +(45*103) +(20*104) + (50*105) = 500+4635 +2080 +5250 =$12,465

a).  Ending inventory using FIFO method =$1,575 Cost of goods sold for FIFO=$12,390

ai) Ending inventory using LIFO =$1,500 Cost of goods sold for LIFO =$12,465

b). Sum of Ending inventory and cogs for FIFO= $13,965 bii). sum of ending inventory and cogs for LIFO =$13,965