Question

Problem 2. Given the following information, determine the cost of ending inventory at December 31:

December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.

December 11: 12 units were sold at $35 per unit

December 15: 20 units were purchased at $10.15 per unit
December 22: 18 units were sold at $35 per unit

Use the above information for parts a, b and c.

a> (14 points) Use the LIFO , Last In First Out, inventory flow and perpetual inventory method to value the ending inventory.   SHOW YOUR WORK

b> (14 points) Use the FIFO, First In First Out, inventory flow and perpetual inventory method to value the ending inventory. SHOW YOUR WORK

c> (14 points) Use the weighted average inventory flow and perpetual inventory method to value the ending inventory. SHOW YOUR WORK

Answer 1

Answer :

(a) Computation of value of inventory as per LIFO method

=  3 unit* $ 7 + 2 unit* $10.15

= $ 41.30

Working note -1

Ending inventory in unit = Purchase in unit - Sales in unit

= ( 5 + 10 +20) - ( 12+ 18)

= 5 unit

Date	purchase	sales	Balance
Dec 2	5 unit * $ 7		5 unit * $ 7
Dec 9	10 unit* $ 9.40		5 unit * $ 7
			10 unit* $ 9.40
Dec 11		12 unit	3 unit* $ 7
Dec 15	20 unit * $ 10.15		3 unit* $ 7
			20 unit * $ 10.15
Dec 22		18 unit	3 unit* $ 7
			2 unit* $10.15

(b) Computation of value of inventory as per FIFO method

= 5 unit* $ 10.15

= $ 50.75

Working note -1

Ending inventory in unit = Purchase in unit - Sales in unit

= ( 5 + 10 +20) - ( 12+ 18)

= 5 unit

Date	purchase	sales	Balance
Dec 2	5 unit * $ 7		5 unit * $ 7
Dec 9	10 unit* $ 9.40		5 unit * $ 7
			10 unit* $ 9.40
Dec 11		12 unit	3 unit* $ 9.40
Dec 15	20 unit * $ 10.15		3 unit* $ 9.40
			20 unit * $ 10.15
Dec 22		18 unit	5 unit* $ 10.15

(c)  Computation of value of inventory as per Weighted average method

= 5 unit* $ 9.95 ( Approx to 2 decimal place)

= $ 49.75

Date	purchase	sales	Total cost	Balance unit	Average rate
Dec 2	5 unit * $ 7		$ 35	5 unit	$ 7
Dec 9	10 unit* $ 9.40		$ 35+ $ 94 =$ 129	15 unit	$ 8.60
Dec 11		12 unit		3 unit	$ 8.60
Dec 15	20 unit * $ 10.15		20 unit * $ 10.15 + 3*$8.60 = 228.80	23	$ 9.95
Dec 22		18 unit		5 unit	$ 9.95