Question

Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

Jan. 1	Inventory	1,100 units @ $130
Feb. 17	Purchase	1,440 units @ $131
Jul. 21	Purchase	1,635 units @ $132
Nov. 23	Purchase	1,130 units @ $134

There are 1,205 units of the item in the physical inventory at December 31. The periodic inventory system is used. Do not round intermediate calculation and round final answer to nearest whole value.

a. Determine the inventory cost by the first-in, first-out method.
$

b. Determine the inventory cost by the last-in, first-out method.
$

c. Determine the inventory cost by the weighted average cost method.
$

Answer 1

Periodic inventory System: In this system, the cost of sales and inventory are determined as the end of the accounting period. Ans a First in, first out method (FIFO) In this method it is assumed that inventory which is purchased first will be sold first and the inventory will consist of recent purchases. Ending inventory Cost of Goods Sold Date Date Jul 21 Nov 23 Unit Rate Amount Unit Rate Amount $130 $1,43,000 $1,88,640 $2,05,920 $5,37,560 $132 $9,900 $1,51,420 Jan 1 1.100 75 Feb 17 Jul 21 $131 $132 $134 1,440 1,130 1,560 $1,61,320 4,100 1,205 Ans b Last in, first out method (LIFO) In this method it is assumed that inventory which is purchased last will be sold first and the inventory will consist of old purchases Ending inventory Date Cost of Goods Sold Date Nov 23 Unit Rate Amount Unit Rate Amount $1,51,420 $2,15,820 $1,74,885 $5,42,125 $134 $130 $131 $1,43,000 $13,755 1,130 Jan 1 1,100 Feb 17 Jul 21 Feb 17 $132 1,635 105 $131 1,335 $1,56,755 1,205 4,100 Ans c In weighted average cost method per unit purchase is derived by adding cost opening inventory and purchase made during the year and then dividing it by the adding the units of opening inventory and units purchased during the year Unit Date Jan 1 Rate Amount $130 $131 $132 $134 $1,43,000 $1,88,640 $2,15,820 $1,51,420 1,100 Feb 17 Jul 21 1,440 1,635 Nov 23 1,130 Cost of Good Available for sale Average Cost [$698880/5305] $6,98,880 $131.74 5,305 Cost of Goods Sold Ending inventory $131.74 $131.74 $5,40,134 $1,58,746 4,100 1,205