Question

Chapter 7 Inventories 381 OBJ. 2,4 ✓b. $167,700 EX 7-12 Periodic inventory by three methods The units of an item available for sale during the year were as follows: Show Jan. 1 Feb. 17 July 21 Nov. 23 Inventory Purchase urchase Purchase 1,000 units at $120 1,375 units at $128 1,500 units at $136 1,125 units at $140 How P There are 1,200 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost by (a) the first-in, first-out method; (b) the last-in, first-out method; and (c) the weighted average cost method.

Answer 1

a. FIFO

FIFO		Cost of Goods Available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	1000	$      120.00	$   1,20,000.00	1000	$       120.00	$   1,20,000.00
Feb-17	Purchase	1375	$      128.00	$   1,76,000.00	1375	$       128.00	$   1,76,000.00
Jul-21	Purchase	1500	$      136.00	$   2,04,000.00	1425	$       136.00	$   1,93,800.00	75	$         136.00	$      10,200.00
Nov-23	Purchase	1125	$      140.00	$   1,57,500.00				1125	$         140.00	$ 1,57,500.00
	Total	5000		$   6,57,500.00	3800		$   4,89,800.00	1200		$ 1,67,700.00

b. LIFO

LIFO		Cost of Goods Available for sale			Cost of Goods Sold			Ending Balance
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Jan-01	Beginning Inventory	1000	$      120.00	$   1,20,000.00				1000	$         120.00	$ 1,20,000.00
Feb-17	Purchase	1375	$      128.00	$   1,76,000.00	1175	$       128.00	$   1,50,400.00	200	$         128.00	$      25,600.00
Jul-21	Purchase	1500	$      136.00	$   2,04,000.00	1500	$       136.00	$   2,04,000.00
Nov-23	Purchase	1125	$      140.00	$   1,57,500.00	1125	$       140.00	$   1,57,500.00
	Total	5000		$   6,57,500.00	3800		$   5,11,900.00	1200		$ 1,45,600.00

c. Weighted Average
Average cost per unit = $657500 / 5000 = $131.50
Ending Inventory = 1200 x $131.50 = $157800