Question

Inventory Costing Methods - Periodic Method The following data are for the Cracker Corporation, which sells just one product

Units Unit Cost

Beginning inventory, January 1..........................................................1200 $18

Purchases February 11........................................................... 1500 $19

May 18...................................................................1400 $20

October 23............................................................1100 $23

Sales March 1..................................................................1400

July 1.....................................................................1400

October 29..............................................................1000

Required

1.) Calculate the value of ending inventory and cost of goods sold for the year using the periodic method and a.) First-in-first out

b.) Last-in-first out

c.) weighted average cost method

2.) If the replacement cost of the inventory at year end is $25, how will the cost of goods sold under each method be affected?

Answer 1

Date Jan 1st 1: FIFO basis Purchase Cost Of goods Sold Activity No.of Units Price per unit Total No.of Units Price per unit Total Opening Balance 1200 $ 18 $ 21,600 Closing No.of Units Price per unit Total 1200 $ 18 $ 21,600 Feb-11 Purchase 1500 $ 19 $ 28,500 1200 $ 1500 $ 18 19 $ 21,600 $ 28,500 Mar 1st Sale 1400 units 1200 $ 200 $ 18 $ 21,600 19 $ 3,800 1300 $ 19 $ 24,700 May 18th purchse 1400 1400 $ 20 $ 28,000 1300 $ 1400 $ 19 $ 24,700 20 $ 28,000 July 1st sales 1400 units 1300 $ 100 $ 19 20 $ 24,700 $ 2,000 1300 $ 20 $ 26,000 Oct-23 Purchase 1100 $ 23 $ 25,300 1300 $ 1100 $ 20 23 $ 26,000 $ 25,300 Oct-29 Sale 1000 units 1000 $ 20 $ 20,000 300 $ 1100 $ 1400 20 $ 6,000 23 $ 25,300 $ 31,300 Total 5200 3800.00 $ 72,100 Under FIFO method Closing stock valut 300 @ 20 and 1100@ 23 per unit = 31300 Cost of Goods sold is $ 72100

2: LIFO basis Purchase Cost Of goods Sold Activity No.of Units Price per unit Total No.of Units Price per unit Total Opening Balance 1200 $ 18 $ 21,600 Date Jan 1st Closing No.of Units Price per unit Total 1200 $ 18 $ 21,600 Feb-11 Purchase 1500 $ 19 $ 28,500 1200 $ 1500 $ 18 19 $ 21,600 $ 28,500 Mar 1st Sale 1400 units 1400 $ 19 $ 26,600 1200 $ 100 $ 18 19 $ 21,600 $ 1,900 May 18th purchse 1400 1400 $ 20 $ 28,000 1200 $ 100 $ 1400 $ 18 19 20 $ 21,600 $ 1,900 $ 28,000 July 1st sales 1400 units 1400 $ 20 $ 28,000 1200 $ 100 $ 18 19 $ 21,600 $ 1,900 Oct-23 Purchase 1100 $ 23 $ 25,300 1200 $ 100 $ 1100 $ 18 $ 21,600 19 $ 1,900 23 $ 25,300 Oct-29 Sale 1000 units 1000 $ 23 $ 23,000 1200 $ 100 $ 100 $ 1400 18 $ 21,600 19 $ 1,900 23 $ 2,300 $ 25,800 Total 5200 3800.00 $ 77,600 Under LIFO method Closing stock valu 100 @ 23 and 100@ 19, 1200@ 18 per unit = 25800 Cost of Goods sold $ 77600 Sheet2 Sheet3

Date Jan 1st 3: WAIGHTED AVG.COST Purchase Cost Of goods Sold Activity No.of Units Price per unit Total No.of Units Price per unit Total Opening Balance 1200 $ 18 $ 21,600 Closing No.of Units Price per unit Total 1200 $ 18 $ 21,600 waited avg.caluculation Feb-11 Purchase 1500 $ 19 $ 28,500 2700 $ 18.56 $ 50,100 $ 1,200 21600 $ 1,500 28500 $ 2,700 $50,100 Per unit 50100/2700 = 18.56 Mar 1st Sale 1400 units 1400 $ 18.56 $ 25,984 1300 $ 18.56 24,128.00 May 18th purchse 1400 1400 $ 20 $ 28,000 2700 $ 19.31 $ 52,128 1300 1400 2700 24128 28000 52128 19.31 July 1st sales 1400 units 1400 19.31 $ 27,034 1300 $ 19.31 $ 25,103 Oct-23 Purchase 1100 $ 23 $ 25,300 2400 $ 21.00 $ 50,400 1300 $ 19.31 1100 $ 23 2400 $25,103 $25,300 $50,403 $ 21.00 Oct-29 Sale 1000 units 1000 $ 21 $ 21,000 1400 $ 21 $ 29,400 Total 5200 3800.00 $ 74,018 1400 $ 29,400 1400 @ 21 per unit = 29400 Under waighted avg method Closing stock value Cost of Goods sold 74018

2) Replacement cost does not affect the cost of goods sold so that there is no change in cost of goods sold of each method