Calculation (15 points): 1. Roo Inc. maintains a perpetual inventory system. Cal

Question

Calculation (15 points):

1. Roo Inc. maintains a perpetual inventory system. Calculate the cost of merchandise sold for the month AND the value of the ending inventory using the LIFO and FIFO. (15 points, 8 points for filling blank, 7 points for calculation procedure.)

First in First out (FIFO): Late in First out (LIFO):

________Cost of merchandise sold _______Cost of merchandise sold

_________Value of ending inventory _______Value of ending Inventory

3-Mar Inventory 12 t-shirts $17 11-Mar Purchase 13 t-shirts $20 14-Mar Sale 18 t-shirts 21-Mar Purchase 9 t-shirts $15 26-Mar Sale 10 t-shirts

Explanation / Answer

Under FIFO (First -In-First-Out) valuation , it is assumed that the sales are from the inventory which is purchased earliest. Therefore the ending inventory wil be valued at the latest purchase price.

Under LIFO (Last-In-First-Out) valuation , it is assumed that the sales are from the inventory which is purchased latest. Therefore the ending inventory wil be valued at the earliest purchase price.

  FIFO LIFO

Cost of merchandise sold 509 497

Value of ending inventory 90 102

Workings:

FIFO

FIFO

Date Beginning Inventory Purchases Cost of goods sold Ending inventory Units Cost per unit Value Units Cost per unit Value Units Cost per unit Value Units Cost per unit Value 3- Mar 12 17 204 12 17.00 204 11 - Mar 12 17 204 13 20 260 25 18.56 464 14 - Mar 25 18.56 464 18 324 7 20.00 140 21 - Mar 7 20 140 9 15 135 16 17.19 275 26 - Mar 16 17.1875 275 10 185 6 15.00 90 Total 12 17 204 22 395 28 509 6 15.00 90

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