Question

Crane Company uses a periodic inventory system and its accounting records include the following inventory information for the month of July:

				Units					Unit Cost			Total Cost
July 1		Inventory on hand			150				$6.00			$900.00
12		Purchase			230				7.00			1,610.00
20		Sale			(250)							0
28		Purchase			490				9.00			4,410.00

A physical inventory count determined that 620 units were on hand at July 31.

(a)

Calculate the ending inventory and the cost of goods sold under (1) FIFO and (2) weighted average. (Round the weighted average cost per unit to 2 decimal places, e.g. 52.75 and final answers to 2 decimal places, e.g. 5,275.75.)

		FIFO		Weighted average
Ending inventory		$		$
Cost of goods sold		$		$

Answer 1

	Units	Unit cost	Total cost
Inventory on hand on July 1	150	6	900
Purchase on July 12	230	7	1610
Purchase on July 28	490	9	4410
Goods available for sale	870		6920

First-in, first-out (FIFO) : In this method those goods are sold first which are purchased first and the ending inventory is from the latest purchases.
Ending inventory = ( 490*9 ) + ( 130*7 ) =	5320
Cost of goods sold = Cost of Goods available for sale - Ending inventory = 6920 - 5320 =	1600

Weighted average :
Cost of Goods available for sale	6920
(/) Units of Cost of Goods available for sale	870
Weighted average cost per unit	7.95

Ending inventory = Ending inventory units * Weighted average cost per unit = 620 * 7.95 =	4929.00
Cost of goods sold = Units sold * Weighted average cost per unit = 250 * 7.95 =	1987.50

	FIFO	Weighted average
Ending inventory	5320	4929.00
Cost of goods sold	1600	1987.50