Ferris Company began 2018 with 4,000 units of its principal product. The cost of
ID: 2576788 • Letter: F
Question
Ferris Company began 2018 with 4,000 units of its principal product. The cost of each unit is $7. Merchandise transactions for the month of January 2018 are as follows:
*Includes purchase price and cost of freight.
5,000 units were on hand at the end of the month.
Required:
Calculate January's ending inventory and cost of goods sold for the month using each of the following alternatives:
1. FIFO, periodic system.
2. LIFO, periodic system.
3. LIFO, perpetual system.
4. Average cost, periodic system.
5. Average cost, perpetual system.
Explanation / Answer
Answer
1.FIFO, Periodic System
A.Cost of Ending Inventory –
The cost of 5,000 units =
Cost @ 9 per unit on 18 jan = 4000* 9 = 36,000
Cost @ 8 per unit on 10 jan = 1000*8 = 8,000
Cost of Ending Inventory for 5,000 units = 44,000
B.Cost of Goods Sold –
Formula = Cost of units in the beginning inventory + Cost of units purchased – cost of unit in the ending inventory
Cost of units in the beginning inventory = 4000*7 = 28,000
Cost of units purchased = 60,000 (given in the question)
Cost of units in the ending inventory =44,000 ( as calculated in part A above)
Cost of Goods Sold = 28,000 + 60,000 – 44,000
= 44,000
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2.LIFO, Periodic System
A.Cost of Ending Inventory –
The cost of 5,000 units =
Cost @ 7 per unit on 1 jan = 4000*7 = 28,000
Cost @ 8 per unit on 10 jan = 1000*8 = 8,000
Cost of Ending Inventory for 5,000 units = 36,000
B.Cost of Goods Sold –
Formula = Cost of units in the beginning inventory + Cost of units purchased – cost of unit in the ending inventory
Cost of units in the beginning inventory = 4000*7 = 28,000
Cost of units purchased = 60,000 (given in the question)
Cost of units in the ending inventory = 36,000 ( as calculated in part A above)
Cost of Goods Sold = 28,000 + 60,000 – 36,000
= 52,000
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3.LIFO, Perpetual system
Date
Purchase
Sales
Balance
1-Jan-18
4,000*7 = 28,000
5-Jan-18
2,000*7 = 14,000
2,000*7 = 14,000
10-Jan-18
3,000*8= 24,000
2,000*7 = 14,000 3,000*8= 24,000
12-Jan-18
1,000*8 = 8,000
2,000*7 = 14,000 2,000*8= 16,000
18-Jan-18
4,000*9= 36,000
2,000*7 = 14,000 2,000*8= 16,000 4,000*9 = 36,000
20-Jan-18
3,000*9= 27,000
2,000*7 = 14,000 2,000*8 = 16,000
1,000 * 9 =9,000
Total
60000
49000
39000
A.Ending Inventory –
2,000*7 + 2,000*8 + 1,000*9 = 39,000
B.Cost of Goods Sold –
Total from the sales side = 49,000
__________________________________________________________________________________
4.Average Cost , Periodic System
A.Ending Inventory –
Average Cost = Total Cost of Inventory / Total units
Total cost of inventory = Purchases + opening stock = 60,000 +28,000 = 88,000
Total units = 7,000 + 4,000 = 11,000
Average Cost = 88,000 / 11,000 = 8 per unit
Ending Inventory = 5,000 * 8 = 40,000
B.Cost of Goods sold
Total units sold = 6,000
Cost of goods sold = 6,000 * 8 = 48,000
_____________________________________________________________________________________
5.Average Cost , Perpetual System
date
Purchase
Sales
Balance
1-Jan-18
4,000*7 = 28,000
5-Jan-18
2,000*7 = 14,000
2,000*7 = 14,000
10-Jan-18
3,000*8= 24,000
2,000*7 = 14,000 3,000*8= 24,000 38,000/5,000 = 7.60 per unit
12-Jan-18
1,000*7.60 = 7,600
4,000*7.60 = 30,400
18-Jan-18
4,000*9= 36,000
4,000*7.60 = 30,400 4,000*9 = 36,000 66,400/8,000 = 8.30
20-Jan-18
3,000*8.30= 24,900
5,000*8.30 = 41,500
Total
60000
46500
41500
A.Ending Inventory –
5,000 units * 8.30 = 41,500
Total units sold = 6,000 units
Cost of goods sold = 2000*7 + 1000*7.60 + 3000*8.30 = 46,500
______________________________________________________________________________
Date
Purchase
Sales
Balance
1-Jan-18
4,000*7 = 28,000
5-Jan-18
2,000*7 = 14,000
2,000*7 = 14,000
10-Jan-18
3,000*8= 24,000
2,000*7 = 14,000 3,000*8= 24,000
12-Jan-18
1,000*8 = 8,000
2,000*7 = 14,000 2,000*8= 16,000
18-Jan-18
4,000*9= 36,000
2,000*7 = 14,000 2,000*8= 16,000 4,000*9 = 36,000
20-Jan-18
3,000*9= 27,000
2,000*7 = 14,000 2,000*8 = 16,000
1,000 * 9 =9,000
Total
60000
49000
39000
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