1. Exercise 7-9 (Algorithmic) Periodic Inventory by Three Methods; Cost of Merch

Question

1. Exercise 7-9 (Algorithmic) Periodic Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale during the year were as follows: Jan. 1 Inventory 30 units @ $104 Mar. 10 Purchase 70 units @ $116 Aug. 30 Purchase 30 units @ $122 Dec. 12 Purchase 70 units @ $126 There are 40 units of the item in the physical inventory at December 31. The periodic inventory system is used. Hide Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations and final answers to the nearest whole dollar. Schedule of Cost of Merchandise Inventory and Cost of Merchandise Sold Inventory Method Merchandise Inventory Merchandise Sold FIFO LIFO Average cost

Explanation / Answer

Jan. 1 Inventory 30 units @ $104 Mar. 10 Purchase 70 units @ $116 Aug. 30 Purchase 30 units @ $122 Dec. 12 Purchase 70 units @ $126 Ending inventory 40 units That means merchandise sold was 160 (200 total units - 40 units remaining) 1. FIFO Cost of MERCHANDISE INVENTORY: 5040 40*126 = 5040 Cost of MERCHANDISE SOLD: 18680 30*104 = 3120 70*116 = 8120 30*122 = 3660 30*126 = 3780 2. LIFO Cost of MERCHANDISE INVENTORY: 4280 30*104 = 3120 10*116 = 1160 Cost of MERCHANDISE SOLD: 19440 60*116 = 6960 30*122 = 3660 70*126 = 8820 3. AVERAGE COST 30*104 = 3120 70*116 = 8120 30*122 = 3660 70*126 = 8820 Total units: 200; Total cost 23720 Average cost per unit: 23720/200 = 119 (118.60 rounded to nearest whole dollar as requested in the directions--if this doesn't work, try not rounding it) Cost of MERCHANDISE INVENTORY = 4760 40*119 Cost of MERCHANDISE SOLD = 19040 160*119 Hope this helps!

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