1. Exercise 7-8 (Algorithmic) Periodic Inventory by Three Methods The units of a

Question

1. Exercise 7-8 (Algorithmic) Periodic Inventory by Three Methods The units of an item available for sale during the year were as follows: Jan.1 Inventory 5 units @ $26 Feb. 17 Purchase 10 units @ $27 Jul. 21 Purchase 20 units @ $29 Nov. 23 Purchase 20 units @ $30 There are 5 units of the item in the physical inventory of December 31. The periodic inventory system is used. Determine the inventory cost under each of the following methods. Round interim calculations and the final answer to the nearest whole dollar. 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. $

Explanation / Answer

Data: Jan 1 Inventory: 5 @ $26 = $130 Feb 27 Purchases: 10 @ $27= $270 Jul 21 Purchases: 20 @ $29= $ 580 Nov 23 Purchases: 20 @ $30= $ 600 Goods available for sales = $ 1580 Units available for sale = 5 + 10 + 20 + 20 = 55 Dec 31: Units left In Inventory = 5 A. Cost of inventory by First In First Out Method. In this case the units that are last purchased would remain in inventory so: Dec 31: Inventory cost = 5 @ $ 30= $ 150. Cost of goods sold = Total – Inventory = $1580 - $ 150 = $ 1430. B. Cost of inventory by Last In First first Method. In this case the units that are First purchased would remain in inventory so: Dec 31: Inventory cost = 5 @ $ 26= $ 130. Cost of goods sold = Total – Inventory = $1580 - $ 130 = $ 1450. C. Cost of inventory by Average Cost Method. Average Cost of the Unit = Total value / total units available = $1580 / 55 = $ 28.7272 = $ 29 Dec 31: Inventory cost = 5 @ $ 29 = $ 145. Cost of goods sold = Total – Inventory = $1580 - $ 145 = $ 1435

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.