Oahu Kiki tracks the number of units purchased and sold throughout each accounti
ID: 2465536 • Letter: O
Question
Oahu Kiki tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method perpetually at the time of each sale, as if it uses perpetual inventory system. Assume Oahu Kiki’s records show the following for the month of January. The company sold 290 units between January 16 and 23. Date Units Unit Cost Total Cost Beginning Inventory January 1 240 $ 70 $ 16,800 Purchase January 15 450 80 36,000 Purchase January 24 210 100 21,000 Required: Calculate the cost of ending inventory and the cost of goods sold using the FIFO and LIFO methods.
Explanation / Answer
Solution:
Calculation of Cost of Ending Inventory and Cost of Goods Sold as per FIFO method
Under FIFO method, the units purchased first are to be issued / sold first.
Date
Units
Unit Cost
Total
Beginning Inventory
January 1
240
$70
$16,800
Purchase
January 15
450
$80
$36,000
Less: Sold Units 290 Between January 16 & 23
- 240 Units from Beginning Inventory
(240)
$70
($16,800)
- 30 Units from Purchase of January 15
(30)
$80
($2,400)
Purchase
January 24
210
$100
$21,000
Cost of Ending Inventory (FIFO Method)
630
$54,600
Cost of Ending Inventory as per FIFO method = $54,600
Cost of Goods Sold as per FIFO method = $16,800 + $2,400 = $19,200
Calculation of Cost of Ending Inventory and Cost of Goods Sold as per LIFO method
Under LIFO method, the units purchased recently issued first.
Date
Units
Unit Cost
Total
Beginning Inventory
January 1
240
$70
$16,800
Purchase
January 15
450
$80
$36,000
Less: Sold Units 290 Between January 16 & 23
- 240 Units from Purchase ofJanuary 15
(240)
$80
($19,200)
- 30 Units from beginning inventory
(30)
$70
($2,100)
Purchase
January 24
210
$100
$21,000
Cost of Ending Inventory
630
$52,500
Cost of Ending Inventory as per LIFO method = $52,500
Cost of Goods Sold as per LIFO method = $19,200 + $2,100 = $21,300
Date
Units
Unit Cost
Total
Beginning Inventory
January 1
240
$70
$16,800
Purchase
January 15
450
$80
$36,000
Less: Sold Units 290 Between January 16 & 23
- 240 Units from Beginning Inventory
(240)
$70
($16,800)
- 30 Units from Purchase of January 15
(30)
$80
($2,400)
Purchase
January 24
210
$100
$21,000
Cost of Ending Inventory (FIFO Method)
630
$54,600
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