Inventory by three methods: The units of an item available for sale during the y

Question

Inventory by three methods:

The units of an item available for sale during the year are as follows:

Jan 1.        Inventory             21 units at 1,800

May 15       Purchase            28 units at 1,950

August 7     Purchase            10 units at 2,040

Nov. 20        Purchase           17 units at 2,100

There are 20 units of the item in the physical inventory at December 31. ROUND YOUR INTERMEDIATE CALCULATIONS AND FINAL ANSWER TO THE NEAREST DOLLAR

1. Using First in First Out Method calculate cost of goods sold

2. Using Last in First Out Method calculate cost of goods sold

3. Using weighted average cost method calculate Ending Inventory, Cost of Goods Sold        

Explanation / Answer

Solution 1:

Under FIFO method ending inventory will consist of 17 unit of nov 20 purchase and 3 units from August 7 purchase

Therefore value fo ending inventory = $35,700 + 3 * $2040 = $41,820

Cost of goods sold = Cost of goods available for sale - ending inventory = $148,500 - $41,820 = $106,680

Solution 2:

Under FIFO method ending inventory will consist of 20 units from beginning inventory

Therefore value fo ending inventory = 20 * $1,800 = $36,000

Cost of goods sold = Cost of goods available for sale - ending inventory = $148,500 - $36,000 = $112,500

Solution 3:

Weighted average cost per unit = Cost of goods available for sale / Nos of units available for sale

= $148,500 / 76 = $1,953.95 per unit

Value of ending inventory = 20 * $1,953.95 = $39,079

Cost of goods sold = $148,500 - $39,079 = $109,421

Computation of cost of goods available for sale Date Qty Purchased Unit Price Amount 1-Jan 21 $1,800.00 $37,800.00 15-May 28 $1,950.00 $54,600.00 7-Aug 10 $2,040.00 $20,400.00 20-Nov 17 $2,100.00 $35,700.00 Total 76 $148,500.00

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