Question

Computing inventory and cost of goods sold under three flow assumptions (LO 9-4)

AICPA

ADAPTED

Frate Company was formed on January 1, 2017. The following information is available from Frate’s inventory records for Product Ply:

	Units	Unit Cost
January 1, 2017
Beginning inventory	800	$ 9.00
Purchases:
January 5, 2017	1,500	10.00
May 25, 2017	1,200	10.50
July 16, 2017	600	11.00
November 26, 2017	900	11.50

A physical inventory on December 31, 2017, shows 1,600 units on hand.

Required:

Prepare schedules to compute the ending inventory at December 31, 2017, and cost of goods sold for the year ended December 31, 2017 under each of the following inventory methods:

1. FIFO

2. LIFO

3. Weighted average

Show supporting computations in good form.

Answer 1

Solution:

Computation of COGS and ending inventory - Periodic FIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	800	$9.00	$7,200	800	$9.00	$7,200.00	0	$9.00	$0.00
Purchases:
5-Jan	1500	$10.00	$15,000	1500	$10.00	$15,000.00	0	$10.00	$0.00
25-May	1200	$10.50	$12,600	1100	$10.50	$11,550.00	100	$10.50	$1,050.00
16-Jul	600	$11.00	$6,600	0	$11.00	$0.00	600	$11.00	$6,600.00
26-Nov	900	$11.50	$10,350	0	$11.50	$0.00	900	$11.50	$10,350.00
Total	5000		$51,750	3400		$33,750.00	1600		$18,000.00

Computation of COGS and ending inventory - Periodic LIFO
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	800	$9.00	$7,200	0	$9.00	$0.00	800	$9.00	$7,200.00
Purchases:
5-Jan	1500	$10.00	$15,000	700	$10.00	$7,000.00	800	$10.00	$8,000.00
25-May	1200	$10.50	$12,600	1200	$10.50	$12,600.00	0	$10.50	$0.00
16-Jul	600	$11.00	$6,600	600	$11.00	$6,600.00	0	$11.00	$0.00
26-Nov	900	$11.50	$10,350	900	$11.50	$10,350.00	0	$11.50	$0.00
Total	5000		$51,750	3400		$36,550.00	1600		$15,200.00

Computation of COGS and ending inventory - Periodic Weighted Average cost method
Particulars	Cost of goods available for sale			Cost of goods sold - Average cost			Ending Inventory - Average cost
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	800	$9.00	$7,200
Purchases:
5-Jan	1500	$10.00	$15,000
25-May	1200	$10.50	$12,600
16-Jul	600	$11.00	$6,600
26-Nov	900	$11.50	$10,350
Total	5000	$10.35	$51,750	3400	$10.35	$35,190	1600	$10.35	$16,560