Question

Carla Vista Co. uses a perpetual inventory system. Data for product E2-D2 includes the following purchases.

Date		Number of Units		Unit Price
May 7		40		$13
July 28		30		18

On June 1, Carla Vista sold 20 units, and on August 27, 30 more units.

Calculate the average cost of the goods sold in the sale. (Round answers to 3 decimal places, e.g. 5.125.)

June 1 sale:
Aug. 27 sale:

Compute the cost of goods sold using FIFO, LIFO, and average-cost. (Round answers to 0 decimal places, e.g. 125.)

		FIFO		LIFO		AVERAGE-COST
Cost of goods sold

Answer 1

Ans. 1	June 1 sale	$13.000
	August 27 sale	$16.000
		Quantity	Rate	Total cost
	Purchase - May 7	40	$13.00	$520
	Sale - June 1	-20	$13.00	-$260
	Subtotal Average Cost	20	$13.00	$260
	Purchase - July 28	30	$18.00	$540
	Subtotal Average Cost	50	$16.00	$800
	Sale - August 27	-30	$16.00	-$480
	Total	20	$16.00	$320
Ans. 2		FIFO	LIFO	AVERAGE COST
	Cost of goods sold	$700	$800	$740
	*Working   Notes:
	Perpetual FIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	07-May	40	$13.00	$520				40	$13.00	$520
	01-Jun				20	$13.00	$260	20	$13.00	$260
	28-Jul	30	$18.00	$540				20	$13.00	$260
								30	$18.00	$540
	27-Aug				20	$13.00	$260
					10	$18.00	$180	20	$18.00	$360
	Total				Cost of goods sold		$700	Ending inventory		$360
	*In FIFO method the units that have purchased first (earliest), are released the first one and the ending inventory
	units remain from the last (recent) purchases.
	LIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	07-May	40	$13.00	$520				40	$13.00	$520
	01-Jun				20	$13.00	$260	20	$13.00	$260
	28-Jul	30	$18.00	$540				20	$13.00	$260
								30	$18.00	$540
	27-Aug				30	$18.00	$540	20	$13.00	$260
	Total				Cost of goods sold		$800	Ending inventory		$260
	*In LIFO method the units that have purchased last, are released the first one and the ending inventory
	units remain from the first purchases.
	AVERAGE   COST
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	07-May	40	$13.00	$520				40	$13.00	$520
	09-Mar				20	$13.00	$260	20	$13.00	$260
	28-Jul	30	$18.00	$540				50	$16.00	800
	27-Aug				30	$16.00	$480	20	$16.00	$320
	Total				Cost of goods sold		$740	Ending inventory		$320
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).