Periodic inventory by three methods; cost of goods sold The units of an item ava

Question

Periodic inventory by three methods; cost of goods sold The units of an item available for sale duning the year were as follows Jan. 1 Inventory Mar, 10 Purchase Aug. 30 Purchase Dec. 12 Purchase There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used Determine the ending inventory cost and the cost of goods sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole doliar 40 units at $96 40 units at $104 20 units at $108 100 units at $110 First-in, first-out (FIFO) Last-in, first-out (LIFO) Weighted average cost Check My Work 2 more Chesk May Work ises temaninp Assignment Score: 50%

Explanation / Answer

1.) FIFO - this method assumes the unit which will become inventory first, will be sold at sold.

Ending inventory (80units)= it should be from last lot of 100 units

i.e. 80 units x $110 = $8,800

Cost of goods sold = (40 x 96) + (40 x 104) + (20 x 108) + (20 x 110)

$12,360

2.) LIFO = it assumes last unit making entry will be sold first.

Ending inventory (80 units) = it will be from initial lots.

(40 x 96) + (40 x 104) = $8,000

Cost of goods sold = (20 x 108) + (100 x 110) = $13,160

3.) Weighted average cost = it takes cost of goods sold available for sale and divide it by the number of units available for sale irrespective of purchase date.

Weighted average cost = {(40 x 96) + (40 x 104) + (20 x 108) + (100 x 110)} ÷ ( 40+40+20+100)

= 21,160 ÷ 200 = 105.8 per unit

Ending inventory = 80 x 105.8 = $8,464

Cost of goods sold = 120 x 105.8 = $12,696

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