Question

Hess Company's inventory records show the following data for the month of September:

                                                                                      Units                          Unit Cost

Inventory, September 1                     100                            $3.00

Purchases: September 8                   450                              3.50

                   September 18                    300                              3.70

A physical inventory on September 30 shows 150 units on hand.

a. Calculate the value of ending inventory and cost of goods sold if the company uses FIFO inventory costing and a periodic inventory system.

b. Calculate the value of ending inventory and cost of goods sold if the company uses LIFO inventory costing and a periodic inventory system.

c: Calculate the value of ending inventory and cost of goods sold if the company uses average costing and a periodic inventory system. Remember, average cost is a “weighted” average.

Answer 1

Solution

	FIFO	LIFO	Weighted Average
Ending Inventory	$                 555	$                       475	$           526.76
Cost of Goods Sold	$              2,430	$                   2,510	$       2,458.24

Working

	Units	Cost per unit	value
Beginning Balance	100	$                     3.00	$ 300
Purchases
	450	$                     3.50	$ 1,575
	300	$                     3.70	$ 1,110
Cost of goods available for sale	850		$ 2,985

.

Average Cost of Inventory
Units	(A)	850
Total Cost	(B)	$ 2,985
Average Cost	(C=B/A)	$ 3.51

.

FIFO
Total Units Available for sale		850
Units Sold		700
Closing Stock in Units		150
Valuation
Ending Inventory	150	@	$               3.70	$            555.00
Cost of Goods sold	2985 minus 555			$        2,430.00
LIFO
Total Units Available for sale		850
Units Sold		700
Closing Stock in Units		150
Valuation
Ending Inventory	100	@	$               3.00	$ 300
	50	@	$               3.50	$ 175
Value Of Ending Inventory				$                  475
Cost of Goods sold	2985 minus 475			$              2,510
Weighted Average method
Total Units Available for sale		850
Units Sold		700
Closing Stock in Units		150
Valuation
Ending Inventory	150	@	$               3.51	$                  527
Value Of Ending Inventory				$                  527
Cost of Goods sold	(Total Purchase and opening stock Minus Closing Stock)	$              2,458