Question

On December 1, 2017, Annalise Company had the account balances shown below.

Debit Credit Cash $6,800 Accumulated Depreciation—Equipment $1,400

Accounts Receivable 3,900 Accounts Payable 2,900

Inventory 1,500 * Owner’s Capital 29,700

*(3,000 x $0.50)

Equipment 21,800

$34,000 $34,000

The following transactions occurred during December:

Dec. 3 Purchased 4,200 units of inventory on account at a cost of $0.70 per unit.

Dec. 5 Sold 4,700 units of inventory on account for $0.92 per unit. (It sold 3,000 of the $0.50 units and 1,700 of the $0.70.)

Dec. 7 Granted the December 5 customer $92 credit for 100 units of inventory returned costing $100. These units were returned to inventory.

Dec. 17 Purchased 2,300 units of inventory for cash at $0.78 each. 22 Sold 2,100 units of inventory on account for $0.97 per unit. (It sold 2,100 of the $0.70 units.) Adjustment data: 1. Accrued salaries payable $400. 2. Depreciation $200 per month.

(e) Compute ending inventory and cost of goods sold under FIFO, assuming Annalise Company uses the periodic inventory system.

Ending Inventory ?

Cost of Goods Sold ?

(f) Compute ending inventory and cost of goods sold under LIFO, assuming Annalise Company uses the periodic inventory system.

Ending Inventory ?

Cost of Goods Sold ?

Answer 1

FIFO
	Units	Price	Amount ($)	Balance	Closing stock
Opening inventory	3,000	0.50	1,500.00	3,000
Purchases	4,200	0.70	2,940.00	7,200
Sales	4,700			2,500	1,750.00
Sales return	100			2,600	1,820.00
Purchases	2,300	0.78	1,794.00	4,900	3,614.00
Sales	2,100			2,800	2,144.00
Closing inventory				2800	2,144.00
Total inventory value			6,234.00
Less: Closing stock			2,144.00
Cost of goods sold			4,090.00

Thus, cost of goods sold and closing inventory under FIFO method are $4,090 and $2,144.

LIFO
	Units	Price	Amount ($)	Balance	Closing stock
Opening inventory	3,000	0.50	1,500.00	3,000
Purchases	4,200	0.70	2,940.00	7,200
Sales	4,700			2,500	1,250.00
Sales return	100	0.50		2,600	1,300.00
Purchases	2,300	0.78	1,794.00	4,900	3,094.00
Sales	2,100	0.78		2,800	1,456.00
Closing inventory				2800	1456.00
Total inventory value			6,234.00
Less: Closing stock			1,456.00
Cost of goods sold			4,778.00

Thus, cost of goods sold and closing inventory under LIFO method are $4,778 and $1,456.