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In: Accounting
Exercise 6-9 Monty Corp. uses the periodic inventory system and reports the following for the month...
Exercise 6-9 Monty Corp. uses the periodic inventory system and reports the following for the month of June. Units Unit Cost Total Cost June 1 Inventory 310 $6 $ 1,860 12 Purchase 620 7 4,340 23 Purchase 465 11 5,115 30 Inventory 155
Compute the cost of the ending inventory and the cost of goods sold using the average-cost method.
Will the results in (a) be higher or lower than the results under FIFO and LIFO?
(Poster request: Please show steps)
Solutions
Expert Solution
WEIGHTED AVERAGE METHOD
| DATE | RECEIPTS | ISSUE | BALANCE | |||||
| UNITS | UNIT COST | TOTAL COST | UNITS | UNIT COST | TOTAL COST | UNITS | TOTAL COST | |
| 1 JUNE | 310 | $1860 | ||||||
| 12 JUNE | 620 | $7 | $4340 | 930 | $6200 | |||
| 20 JUNE | 465 | $11 | $5115 | 1395 | $11315 | |||
| 30 JUNE | 1240 | $8.1 | $10044 | 155 | $1271 |
Note : As Sales aren't mentioned, I assumed the sales on 30 June
WORKING NOTE:
CALCULATION OF PRICE FOR ISSUE ISSUE PRICE = 
COST OF GOOD SOLD = $10044
INVENTORY IN END = 155= $1271
2 FIFO METHOD
| DATE | PURCHASES | SALES | BALANCE | ||||||
| UNITS | UNIT COST | TOTAL COST | UNITS | UNIT COST | TOTAL COST | UNITS | UNIT COST | TOTAL COST | |
| 1 JUNE | 310 | $6 | $1860 | ||||||
| 12 JUNE | 620 | $7 | $4340 | 310 | $6 | $1860 | |||
| 620 | $7 | $4340 | |||||||
| 23 JUNE | 465 | $11 | $5115 | 310 | $6 | $1860 | |||
| 620 | $7 | $4340 | |||||||
| 465 | $11 | $5115 | |||||||
| 30 JUNE | 310 | $6 | $1860 | 155 | $11 | $1705 | |||
| 620 | $7 | $4340 | |||||||
| 310 | $11 | $3410 |
Note : As Sales aren't mentioned, I assumed the sales on 30 June
COST OF GOOD SOLD = $1860 + $4340 + $3410 = $9610
INVENTORY IN END = 155*$11=$1705
3 LIFO METHOD
| DATE | PURCHASES | SALES | BALANCE | ||||||
| UNITS | UNIT COST | TOTAL COST | UNITS | UNIT COST | TOTAL COST | UNITS | UNIT COST | TOTAL COST | |
| 1 JUNE | 310 | $6 | $1860 | ||||||
| 12 JUNE | 620 | $7 | $4340 | 310 | $6 | $1860 | |||
| 620 | $7 | $4340 | |||||||
| 23 JUNE | 465 | $11 | $5115 | 310 | $6 | $1860 | |||
| 620 | $7 | $4340 | |||||||
| 465 | $11 | $5115 | |||||||
| 30 JUNE | 465 | $11 | $5115 | 155 | $6 | $930 | |||
| 620 | $7 | $4340 | |||||||
| 155 | $6 | $930 |
Note : As Sales aren't mentioned, I assumed the sales on 30 June
COST OF GOOD SOLD = $5115 + $4340 + $930 = $10385
INVENTORY IN END = 155* $6 = $930
Conclusion:
- COGS under LIFO method is higher than the COGS under Average Cost Method.
- COGS under FIFO method is lower than the COGS under Average Cost Method.
- Ending Inventory under LIFO method is lower than the Ending Inventory under Average Cost Method.
- Ending Inventory under FIFO method is higher than the Ending Inventory under Average Cost Method
.
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ekkarill92 answered 1 year agoRelated Solutions
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