Question

In: Accounting

The units of an item available for sale during the year were as follows: Jan. 1...

The units of an item available for sale during the year were as follows:

Jan. 1 Inventory 1,000 units at $15
Feb. 17 Purchase 1,375 units at $16
July 21 Purchase 1,500 units at $17
Nov. 23 Purchase 1,125 units at $18

There are 1,100 units of the item in the physical inventory at December 31. The periodic inventory system is used.

a. Determine the inventory cost by the first-in, first-out method.
$fill in the blank 1

b. Determine the inventory cost by the last-in, first-out method.
$fill in the blank 2

c. Determine the inventory cost by the weighted average cost method.
$fill in the blank 3

Solutions

Expert Solution

A.FIFO

FIFO Cost of Goods Available for sale Cost of Goods Sold Ending Balance
Date Activity Units Unit Price Amount Units Unit Price Amount Units Unit Price Amount
1-Jan Beginning Inventory 1000 $      15.00 $    15,000.00 1000 $       15.00 $    15,000.00
17-Feb Purchase 1375 $      16.00 $    22,000.00 1375 $       16.00 $    22,000.00
21-Jul Purchase 1500 $      17.00 $    25,500.00 1500 $       17.00 $   1,93,800.00
23-Nov Purchase 1125 $      18.00 $    20,250.00 25 $       18.00 $         450.00 1100 $         18.00 $    19,800.00
Total 5000 $    82,750.00 3900 $    37,450.00 1100 $    19,800.00

B. LIFO

LIFO

Cost of Goods Available for sale Cost of Goods Sold Ending Balance
Date Activity Units Unit Price Amount Units Unit Price Amount Units Unit Price Amount
1-Jan Beginning Inventory 1000 $       15.00 $ 15,000.00 1000 $15 $15000
17-Feb Purchase 1375 $       16.00 $ 22,000.00 1275 $16 $ 20400 100 $16 $1600
21-Jul Purchase 1500 $       17.00 $ 25,500.00 1500 $       17.00 $    25,500.00
23-Nov Purchase 1125 $       18.00 $ 20,250.00 1125 $       18.00 $    20,250.00
Total 5000 $ 82,750.00 3900 $66150 1100 $16600

Ans C weighted average cost method.

c. Weighted Average
Average cost per unit = $82750 / 5000 = $16.55
Ending Inventory = 1100 x $16.55 = $18,205

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