Question

Hamilton Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 1: Units Unit Cost 2,000 $5 Inventory, December 31, prior year For the current year: Purchase, March 21 Purchase, August 1 Inventory, December 31, current year 6,000 4,000 3,000 Required: Compute ending inventory and cost of goods sold under FIFO, LIFO, and average cost inventory costing methods. FIFO L IFO Average Cost Ending inventory Cost of goods sold

Answer 1

	Unit	Unit Cost	Total Cost
Beginning inventory	2000	5	10000
Purchase 1	6000	4	24000
Purchase 2	4000	2	8000
Total	12000		42000

Calculate ending inventory and cost of goods sold

	FIFO	LIFO	Average cost
Ending inventory	3000*2 = 6000	14000	42000/12000*3000 = 10500
Cost of goods sold	42000-6000 = 36000	42000-14000 = 28000	42000-10500 = 31500