Irish Company uses the periodic inventory method and had the following inventory

Question

Irish Company uses the periodic inventory method and had the following inventory information available:

Units Unit Cost Total Cost

1/1 Beginning Inventory 100 $5 $ 500

1/20 Purchase 400 $6 2,400

7/25 Purchase 200 $7 1,400

10/20 Purchase 300 $8 2,400

1,000 $6,700

A physical count of inventory on December 31 revealed that there were 480 units on hand.

Instructions Answer the following independent questions and show computations supporting your answers.

1. Assume that the company uses the FIFO method. How much is the value of the ending inventory at December 31? How much is the cost of goods sold?

2. Assume that the company uses the Average-Cost method. How much is the value of the ending inventory on December 31? How much is the cost of goods sold?

3. Assume that the company uses the LIFO method. How much is the value of the ending inventory on December 31? How much is the cost of goods sold?

Explanation / Answer

Irish Company 1. FIFO Method of valuation Under this method the inventories purchased in the beginning are the first ones to be sold and inventories purchased later are sold later a.Value of Closing Inventory on December 31 Units Unit price Value Balance units Closing Inventory 480 Last purchase 10/20 300 $                  8 $       2,400 180 Balance inventory from purchase on 25/7 180 $                  7 $       1,260 0 Value of Closing Inventory at December 31 $       3,660 b. Cost of Goods Sold:- Total cost of Inventory $       6,700 Less closing Inventory value $       3,660 Cost of Goods Sold $       3,040 1. FIFO Method of valuation 2. Average Cost Method of valuation Under this method it is assumed that Inventories are consumed simultaneously Calculation Value Average cost of Inventory $ 6,700/1,000 $         6.70 a. Closing Inventory value 480 units @ $ 6.7 $       3,216 b.Cost of Goods Sold $ 6,700- $ 3,216 $       3,484 3. LIFO Method of valuation Under this method the last inventories purchased are first ones to be consumed/ sold, and that inventories purchased first are sold last. a.Value of Closing Inventory on December 31 Units Unit price Value Balance units Closing Inventory 480 Beginning Inventory 1/1 100 $                  5 $           500 380 Balance inventory from purchase on 1/20 380 $                  6 $       2,280 0 Value of Closing Inventory at December 31 $       2,780 b. Cost of Goods Sold:- Total cost of Inventory $       6,700 Less closing Inventory value $       2,780 Cost of Goods Sold $       3,920

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

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