Question

In: Accounting

The following information is available for Harold Company: Beginning inventory                500 units at $5 First purchase         &n

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.

Solutions

Expert Solution

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

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