^^ WRONG ANSWERS^^ The college campus bookstore uses a periodic inventory system

Question

^^ WRONG ANSWERS^^

The college campus bookstore uses a periodic inventory system. The bookstore purchases 405 copies of a textbook at $69 each in June, 990 copies in August at $71 each, and 610 copies in December at $74 each. The bookstore sold 1,885 copies of the textbook during the year. Required Calculate the company's ending inventory and cost of goods sold using the each of following inventory costing methods. a. FIFO Cost of Goods Sold$ 8,880 Ending Inventory $ 134,495 b. LIFO Cost of Goods Sold $ Ending Inventory 8,280 135,095

Explanation / Answer

a)

Under First In First Out method, cost of goods sold is constituted from the older inventory and the closing stock is from the recent purchases.

So, Cost of goods sold = 405 x $69 + 990 x $71 + (1885 - 405 - 990) x 74 = $134,495

Closing stock = (405 + 990 + 610 - 1885) x $74 = $8,880

b)

Under Last In First Out method, cost of goods sold is constituted from the newer inventory and the closing stock is from the older purchases.

So, Cost of goods sold = 610 x $74 + 990 x $71 + (1885 - 610 - 990) x 69 = $135,095

Closing stock = (405 + 990 + 610 - 1885) x $69 = $8,280

c)

Under weighted average method, an average rate is determined for all inventory inclusing the opening inventory and the purchases made during the year and this rate is used to determine the closing inventory value.

Average rate = C / A = $143,375 / 2,005 = $71.51

So, value of closing stock of 120 units = 120 x $71.51 = $8,581

So, Cost of goods sold = 1,885 units x $71.51 = $134,796

Calculations A B C = A x B quantity Rate Amount Purchases 405 69 27945 Purchases 990 71 70290 Purchases 610 74 45140 Total 2005 143375

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