PA7-2 Analyzing and Interpreting the Financial Statement Effects of FIFO, LIFO,

Question

PA7-2 Analyzing and Interpreting the Financial Statement Effects of FIFO, LIFO, and Weighted Average (Perpetual Inventory) LO3

Orion Iron Corp. uses a perpetual inventory system. At the end of the annual accounting period, December 31, 2009, the accounting records provided the following information:

Transactions Units Unit Cost
Inventory, December 31, 2008 2,000 $8.00
For the year 2009:
Purchase, April 11 10,000 10.40
Sale, May 1 (sold for $40 per unit) 2,000
Purchase, June 1 8,000 12.25
Sale, July 3 (sold for $40 per unit) 6,000
Operating expenses (excluding income tax expense), $195,000

Requirement 1:
Compute the cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average. (Round weighted average cost per unit to 3 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

(a) FIFO:
(b) LIFO:
(c) Weighted–Average:

Explanation / Answer

FIFO

LIFO

Weighted Average

Date Particulars units cost per unit Total Cost 31-Dec-08 Opening Inventory 2000 8 $         16,000.00 11-Apr-09 Purchases 11000 10.4 $     1,14,400.00 01-Jun-09 purchases 8000 12.25 $         98,000.00 Total goods available for sale 21000 $     2,28,400.00 less:Closing Inventory 13000 5000*$10.4 + 8000 *$12.25 $     1,50,000.00 Cost of good sold 8000 2000*$8 + 6000*$10.4 $         78,400.00

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