Question

Inventory by Three Methods

The units of an item available for sale during the year were as follows:

Jan.1	Inventory	17 units @ $38 per unit
Feb. 17	Purchase	4 units @ $40 per unit
Jul. 21	Purchase	11 units @ $42 per unit
Nov. 23	Purchase	12 units @ $44 per unit

There are 22 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the inventory cost under each of the following methods.

a. Determine the inventory cost by the first-in, first-out method.
$

b. Determine the inventory cost by the last-in, first-out method.
$

c. Determine the inventory cost by the average cost method. When computing your answer, round the average cost per unit to the nearest whole dollar.
$

Answer 1

Answer = A)
FIFO METHOD
		PURHASES			COST OF GOODS SOLD			CLOSING BALANCE
Date	Particulars	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost
Jan , 01	Opening Inventory	17	$38	$646
	Add:
Feb , 17	Purchases	4	$40	$160
July, 21	Purchases	11	$42	$462
Nov, 323	Purchases	12	$44	$528
	Total Units Available	44		$1,796
	Sales (44 units - 22 Units)				17	$38	$646
					4	$40	$160
					1	$42	$42	10	$42	$420
								12	$44	$528
					22		$848	22		$948
Answer = B)
LIFO METHOD
		PURHASES			COST OF GOODS SOLD			CLOSING BALANCE
Date	Particulars	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost
Jan , 01	Opening Inventory	17	$38	$646
	Add:
Feb , 17	Purchases	4	$40	$160
July, 21	Purchases	11	$42	$462
Nov, 323	Purchases	12	$44	$528
	Total Units Available	44		$1,796
	Sales (44 units - 22 Units)				12	$44	$528
					10	$42	$420	1	$42	$42
								4	$40	$160
								17	$38	$646
					22		$948	22		$848
Answer = C)
Average Cost Method
		PURHASES			COST OF GOODS SOLD			CLOSING BALANCE
Date	Particulars	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost
Jan , 01	Opening Inventory	17	$38	$646
	Add:
Feb , 17	Purchases	4	$40	$160
July, 21	Purchases	11	$42	$462
Nov, 323	Purchases	12	$44	$528
	Total Units Available	44	$41	$1,796
	Sales (44 units - 22 Units)			$898	22	$41	$902
								22	$41	$902
					22		$902	22		$902