Question

ost Flow Methods Three identical units of Item K113 are purchased during July, as shown below. Item K113 Units Cost July 9 Purchase 1 $250 July 17 Purchase 1 254 July 26 Purchase 1 258 Total 3 $762 Average cost per unit $254 ($762 ÷ 3 units) Assume that one unit is sold on July 31 for $320. Determine the gross profit for July and ending inventory on July 31 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods. Gross Profit Ending Inventory a. First-in, first-out (FIFO) $ $ b. Last-in, first-out (LIFO) $ $ c. Weighted average cost $ $

Answer 1

a) FIFO

	Quantity	Price	Cost
Beginning inventory	0	0	0
Purchases
July 9	1	250	250
July 17	1	254	254
July 26	1	258	258
Total	3		762
Cost of goods sold	1	250	250
Ending inventory	2		512
Gross profit:
Sale	1	320	320
Cost of goods sold	1	250	250
Gross profit			70

b) LIFO

	Quantity	Price	Cost
Beginning inventory	0	0	0
Purchases
July 9	1	250	250
July 17	1	254	254
July 26	1	258	258
Total	3		762
Cost of goods sold	1	258	258
Ending inventory	2		504
Gross profit:
Sale	1	320	320
Cost of goods sold	1	258	258
Gross profit			62

c) Weighted average cost

	Quantity	Price	Cost
Beginning inventory	0	0	0
Purchases
July 9	1	250	250
July 17	1	254	254
July 26	1	258	258
Total	3		762
Cost of goods sold	1	254	254
Ending inventory	2		508
Gross profit:
Sale	1	320	320
Cost of goods sold	1	254	254
Gross profit			66