Question

EXTRA CREDIT CHAPTER 5 & 6 During 2015, a company sells 220 units of inventory. The company has the following inventory purchase transactions for 2018 (6 points) Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 115 $60 $6900 Sep. 8 Purchase 210 6 2 13020 Nov 18 Purchase 8575 6375 4101 $26.295 Calculate cost of goods sold and ending inventory for 2015 Specific ID Sold all of beginning inventory, 25 from Nov 18 purchase, and the rest out of Sep 8 purchase. FIFO LIFO AVERAGE COST BONUS. QUESTION At 1/1/2010 the allowance had a

Answer 1

a) Specific Identification Method:-

Cost of goods sold

= Cost of beginning inventory+Purchase cost of 25 units on Nov 18+Purchase cost of 80 units on Sep 8

= $6,900+(25 units*$75)+(80 units*$62)

= $6,900+$1,875+$4,960 = $13,735

Cost of ending inventory = [(210-80)*$62]+[(85-25)*$75]

= $8,060+4,500 = $12,560

Therefore cost of goods sold is $13,735 and cost of ending inventory is $12,560 under specific identification method.

b) FIFO Method:-

Under FIFO method the goods purchased first are sold first and therefore Cost of goods sold under this method would include 115 units from beginning inventory and remaining 105 units (220-115) purchased on Sep 8.

Cost of goods sold = $6,900+(105 units*$62)

= $6,900+$6,510 = $13,410

Cost of ending inventory = [(210-105)*$62]+$6,375

= $6,510+$6,375 = $12,885

Therefore cost of goods sold is $13,410 and cost of ending inventory is $12,885 under FIFO method.

c) LIFO Method:-

Under LIFO method the goods purchased last are sold first and therefore Cost of goods sold under this method would include 85 units purchased on Nov 18 and remaining 135 units (220-85) purchased on Sep 8.

Cost of goods sold = (85 units*$75)+(135 units*$62)

= $6,375+$8,370 = $14,745

Cost of ending inventory = [(210-135)*$62]+$6,900

= $4,650+$6,900 = $11,550

Therefore cost of goods sold is $14,745 and cost of ending inventory is $11,550 under LIFO method.

d) Average Cost Method:-

Average cost per unit = Total cost of goods available for sale/Total units available

= $26,295/410 units = $64.13415 per unit

Cost of goods sold = 220 units*$64.13415 = $14,110

Cost of ending inventory = (410-220)*$64.13415 = $12,185

Therefore cost of goods sold is $14,110 and cost of ending inventory is $12,185 under Average Cost method.