Question

The following data are available for Sellco for the fiscal year ended on January 31, 2020: Sales 810 units Beginning inventory 230 units @ $ 4 Purchases, in chronological order 310 units @ $ 4 410 units @ $ 6 200 units @ $ 7 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.)

Assume that net income using the weighted-average cost flow assumption is $12,500. Calculate net income under FIFO and LIFO. (Round unit cost to 2 decimal places.)

Answer 1

Periodic inventory
LIFO
	# of units	Cost per Unit	Cost of Goods Available for Sale
	200	$7.00	$1,400
	410	6	$2,460
	200	4	$800
Total	810		$5,060
Ending inventory	110	4	440
	230	$4.00	920
	340		1360
FIFO
	# of units	Cost per Unit	Cost of Goods Available for Sale
Beginning inventory	230	$4.00	$920
	310	4	$1,240
	270	6	$1,620
Total	810		$3,780
Ending inventory	140	6	$840
	200	7	$1,400
	340		2240
Average Cost method
	# of units	Cost per Unit	Cost of Goods Available for Sale
Beginning inventory	230	$4.00	$920
	310	4	$1,240
	410	6	$2,460
	200	7	$1,400
Total	1150	5.23	6020
COGS	810*5.23	4240.17
Ending Inventory	340*5.23	1778.2
periodic
	LIFO	FIFO	Average
COGS	$5,060	$3,780	$4,240
Ending Inventory	$1,360	$2,240	$1,778

The effect on net income will be the difference between the cost of goods sold as computed under the weighted average method, versus the cost of goods as computed under the FIFO and LIFO methods, respectively. FIFO cost of goods sold is $460 lower than the weighted average cost of goods sold ($3780 -$4,240), so net income will be $460 higher under FIFO, or $12,960. Under LIFO (5060-4240) 820 lower under LIFO, or 11680