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Calculator Printem Cengage Learn Periodic Inventory by Three Methods cbumin Accounting The units of an item valable for sale during the year were as follows: Jan. 1 Inventory 1,065 units $120 Feb. 17 Purchase 1,385 units $121 Jul 21 Purchase 1,510 units $123 Nov. 23 Purchase 1,135 units $123 There are 1,210 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 serta berst whole a. Determine the inventory cost by the first in tout method b. Determine the inventory cost by the last stout method c. Determine the inventory cost by the weighted average cost method.

Answer 1

Facts of the Question:

Date	Particulars	Number of Units	Cost per unit	Total Cost
Jan'1	Beginning Inventory	1,065	$ 120	$ 127,800
Feb'17	Purchase	1,385	$ 121	$ 167,585
Jul'21	Purchase	1,510	$ 123	$ 185,730
Nov'23	Purchase	1,135	$ 123	$ 139,605
Total		5,095		$ 620,720

There are 1,210 units of item in physical inventory on December 31.     

Answer 1)

First-in, First-out Method

First-in, First-out Method: Under this method following periodic inventory system, the value of inventory is calculated at the end of a certain period on the assumption that the inventory which is bought first will be sold first and so on. Thus the units of inventory which are bought at a latest date will form part of the ending inventory.         

Thus under First-in, First-out Method out of 1,210 units in inventory on December 31, 1,135 units will be from the purchase made on Nov’23 at $ 123 per unit and balance 75 units will be from the purchase made on July’21 at $ 123 per unit.

Date	Particulars	Number of Units	Cost per unit	Total Cost
Nov'23	Purchase	1,135	$ 123	$ 139,605
Jul'21	Purchase	75	$ 123	$ 9,225
Total		1,210		$ 148,830

Thus the value of 1,210 units of inventory under First-in, First-out Method is $ 148,830.

Answer 2)

Last-in, First-out Method

Last-in, First-out Method: Under this method following periodic inventory system, the value of inventory is calculated at the end of a certain period on the assumption that the latest bought inventory will be sold first and moving backwards. Thus the units of inventory which are bought at the earliest date will form part of the ending inventory.              

Thus under Last-in, First-out Method out of 1,210 units in inventory on December 31, 1,065 units will be from the beginning inventory on Jan’1 at $ 120 per unit and balance 145 units will be from the purchase made on February’17 at $ 121 per unit.

Date	Particulars	Number of Units	Cost per unit	Total Cost
Jan'1	Beginning Inventory	1,065	$ 120	$ 127,800
Feb'17	Purchase	145	$ 121	$ 17,545
Total		1,210		$ 145,345

Thus the value of 1,210 units of inventory under Last-in, First-out Method is $ 145,345.

Answer 3)

Weighted Average Cost Method

Weighted Average Cost Method: Under this method following periodic inventory system, a weighted average cost is calculated by dividing the aggregate value of opening inventory and inventory purchased during the period by Total number of units in beginning inventory and units purchased during the period.

The weighted average cost so calculated is the multiplied with units in the ending inventory to calculated its value.

Date	Particulars	Number of Units	Cost per unit	Total Cost
Jan'1	Beginning Inventory	1,065	$ 120	$ 127,800
Feb'17	Purchase	1,385	$ 121	$ 167,585
Jul'21	Purchase	1,510	$ 123	$ 185,730
Nov'23	Purchase	1,135	$ 123	$ 139,605
Total		5,095		$ 620,720

Weighted average cost = (aggregate value of opening inventory and inventory purchased during the period)/ Total number of units in beginning inventory and units purchased during the period

                                    = $ 620,720/ 5,095 units

                                    = $ 121.8292 per unit

Value of ending inventory = Weighted average cost per unit X number of units in ending inventory

                                                = $ 121.8292 X 1,210 units

                                              = $ 147,413.39 or $ 147,413 (rounded off)

Thus the value of 1,210 units of inventory under Weighted Average Cost Method is $ 147,413.