period Penn Company uses a periodic inventory system. At the end of the annual a
ID: 2550755 • Letter: P
Question
period Penn Company uses a periodic inventory system. At the end of the annual accounting December 31 of the current year, the accounting records provided the following information for product 1: Units Unit Cost 2,000 $5 Inventory, December 31, prior year For the current year: Purchase, March 21 Purchase, August 1 5,000 3,000 4,000 Inventory, December 31, current year Required: Compute ending inventory and cost of goods sold for the current year under FIFO, LIFO, and average cost inventory costing methods. FIFO LIFO Average Cost Ending inventory Cost of goods soldExplanation / Answer
Units sold = Beginning inventory + Purchases - Ending inventory
= 2,000 + 8,000 - 4,000
= 6,000
FIFO METHOD
2000*5 = 10,000
5,000*6 = 30,000
2,000*5 = 10,000
5,000*6 = 30,000
3,000*8 = 24,000
2,000*5 = 10,000
4,000*6 = 24,000
1,000*6 = 6,000
3,000*8 = 24,000
LIFO METHOD
2000*5 = 10,000
5,000*6 = 30,000
2,000*5 = 10,000
5,000*6 = 30,000
3,000*8 = 24,000
3,000*8 = 24,000
3,000*6 = 18,000
2,000*5 = 10,000
2,000*6 = 12,000
Cost per unit under Average method = Cost of units available for sale / Number of units available for sale
= [(2,000*5) + (5,000*6) + (3,000*8)] / 10,000
= 64,000 / 10,000
= 6.4
Date Perticulars Units*unit cost Ending inventory Beginning invenrory 2000*5 = 10,000 March 21 Purchases 5,000*6=30,0002000*5 = 10,000
5,000*6 = 30,000
August 1 Purchases 3,000*8=24,0002,000*5 = 10,000
5,000*6 = 30,000
3,000*8 = 24,000
Sales2,000*5 = 10,000
4,000*6 = 24,000
1,000*6 = 6,000
3,000*8 = 24,000
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