Question

The following information is available for Harold Company:

Beginning inventory                500 units at $5

First purchase                         900 units at $6

Second purchase                    600 units at $7

Assume that Harold uses a periodic inventory system and that there are 750 units left at the end of the month.

Instructions

Compute the cost of goods sold under the

LIFO

FIFO

Average Cost

Enter calculation and answer below.

Answer 1

	FIFO	LIFO	Average Cost
The cost of goods sold	$7,300	$8,100	$7,562
FIFO
Units	Unit Cost
150	$6	$900
600	$7	$4,200
Ending Inventory		$5,100
COGS =	Beginning inventory + Purchases - Ending inventory
=	$2,500 + $9,600 - 4,800
=	$7,300
LIFO
Units	Unit Cost
500	$5	$2,500
250	$6	$1,500
Ending Inventory		$4,000
COGS =	Beginning inventory + Purchases - Ending inventory
=	$2,500 + $9,600 - 4,000
=	$8,100
Average Cost
500	$5	$2,500
900	$6	$5,400
600	$7	$4,200
2,000		$12,100
Weighted Average cost per unit		$6.05
($12,100/2,000)
Ending Inventory	$4,538
(750 x $6.05)
COGS =	Beginning inventory + Purchases - Ending inventory
=	$2,500 + $9,600 - 4,538
=	$7,562