Question

The following data are available for Sellco for the fiscal year ended on January 31, 2020:

Sales	840	units
Beginning inventory	220	units	@	$	3
Purchases, in chronological order	310	units	@	$	5
	400	units	@	$	6
	230	units	@	$	8

Required:
a. Calculate cost of goods sold and ending inventory under the cost flow assumptions, FIFO, LIFO and Weighted average (using a periodic inventory system): (Round unit cost to 2 decimal places.)

b. Assume that net income using the weighted-average cost flow assumption is $12,400. Calculate net income under FIFO and LIFO. (Round unit cost to 2 decimal places.)

Answer 1

Solution

Requirement a

	Cost of Ending inventory	Cost of goods sold
FIFO	$                 2,380	$                   4,070
LIFO	$                 1,160	$                   5,290
Weighted average	$                 1,779	$                   4,671

Requirement b

	Net income
FIFO	$               13,001
LIFO	$         11,781.00

Working

Net income as per Weighted average	$               12,400
Add: Difference in Cost of goods sold between fifo and weighted average (4070-4670)	$                     601
Net income as per FIFO	$               13,001

.

Net income as per Weighted average	$         12,400.00
Less: Difference in Cost of goods sold between LIFO and weighted average (5290-4671)	$             (619.00)
Net income as per LIFO	$         11,781.00

.

	Units	Cost per unit	value
Beginning Balance	220	$                     3.00	$ 660
Purchases
	310	$                     5.00	$ 1,550
	400	$                     6.00	$ 2,400
	230	$                     8.00	$ 1,840
Total	1160		$ 6,450

.

Average Cost of Inventory
Units	(A)	1160
Total Cost	(B)	$ 6,450
Average Cost	(C=B/A)	$                     5.56

.

FIFO
Total Units Available for sale		1160
Units Sold		840
Closing Stock in Units		320
Valuation
Ending Inventory	230	@	$               8.00	$ 1,840
	90	@	$               6.00	$ 540
Value Of Ending Inventory				$              2,380
Cost of Goods sold				$              4,070
LIFO
Total Units Available for sale		1160
Units Sold		840
Closing Stock in Units		320
Valuation
Ending Inventory	220	@	$               3.00	$ 660
	100	@	$               5.00	$ 500
Value Of Ending Inventory				$              1,160
Cost of Goods sold				$              5,290
Weighted Average method
Total Units Available for sale		1160
Units Sold		840
Closing Stock in Units		320
Valuation
Ending Inventory	320	@	$               5.56	$              1,779
Value Of Ending Inventory				$              1,779
Cost of Goods sold	(Total Purchase and opening stock Minus Closing Stock)			$              4,671