Question

Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average Cost Assume that Gode Company reports the following initial balance and subsequent purchase of inventory: Beginning inventory, 2017 1,000 units @ $100 each $100,000 Inventory purchased in 2017 2.000 units $150 each 300,000 Cost of goods available for sale in 2017 3.000 units $400,000 Assume that 1,600 units are sold during 2017. Compute the cost of goods sold for 2017 and the balance reported as ending inventory on its 2017 balance sheet under the following inventory costing methods: (Round your answers to the nearest dollar.) a. FIFO Cost of Good Sold 300.000 Ending Inventory 210.000 b. LIFO Cost of Good Sold S 100.000 Ending Inventory 140.000 c Average Cost (Hint: Do not round the cost per unit.) Cost of Good Sold S 133.33 Ending Inventory 186,662 Check

Answer 1

During the year 2017
S/n	Particulars	Units	Rate in $	Value in $
a	Beginning inventory	1000	$        100	$       1,00,000
b	Inventory Purchased	2000	$        150	$       3,00,000
c	Cost of goods available for Sale	3000		$       4,00,000
d	Number of Unit Sold	1600
Answer 1	Cost of Good sold
a	Number of Unit Sold (in Units)			1600
b	Average rate for units sold (Note 1)			$                 133
c	Cost of Good sold (a * b)			$ 2,13,333.33
Note 1	Rate For Sale assume to be Average rate
	Total value of goods available for sale (c in Value)			$       4,00,000
	Total inventory available for sale (c in units)			3000
	Average Rate (c in value /c in units)			$                 133

Answer 2
(a)	Closing stock as per FIFO (First In First Out method)
		Purchase			Sale			Balance
S/n	Particulars	Units	Rate in $	Value in $	Units	Rate in $	Value in $	Units	Rate in $	Value in $
a	Beginning inventory	1000	$        100	$       1,00,000	-	-	-	-	-	-
b	inventory Purchased	2000	$        150	$       3,00,000	-	-		-	-	-
c	Units sold (1600 units) (Note 2)	-	-	-	1000	$        100	$       1,00,000	-	-	-
		-	-	-	600	$        150	$           90,000	-	-	-
d	Balance of inventory As per FIFO Method							1400	$           150	$ 2,10,000
Note 2	Under FIFO method, At the time inventory sale first preference given to first inventory (its rate also) came to warehouse and after finishing such inventory second preference given to next purchase after the first purchase.
	In this case for sale, First preference given for opening inventory and balance 600 units will taken from inventory purchased units during the year
	For the closing stock valuation balance of purchased inventory 1400 units will come.
(b)	Closing stock as per LIFO (Last In First Out method)
		Purchase			Sale			Balance
S/n	Particulars	Units	Rate in $	Value in $	Units	Rate in $	Value in $	Units	Rate in $	Value in $
a	Beginning inventory	1000	$        100	$       1,00,000	-	-	-	-	-	-
b	inventory Purchased	2000	$        150	$       3,00,000	-	-	-	-	-	-
c	Units sold (1600 units) (Note 3)	-	-	-	1600	$        150	$       2,40,000	-	-	-
d	Balance in Last purchased inventory	-	-	-	-	-	-	400	$           150	$     60,000
e	Balance in Opening inventory	-	-	-	-	-	-	1000	$           100	$ 1,00,000
f	Closing stock as per LIFO Method							1400		$ 1,60,000
(Note 3)	Under LIFO Method, At the time of inventory sale first preference given to last inventory (its rate also) came to warehouse and next preference given to after finishing the last purchased inventory subsequently purchased inventory.
	In this case for sale, first preference given for last inventory that is purchased during the year.
	For the closing stock valuation, Balance of last inventory that is purchased inventory 400 units and and opening inventory 1000 units will consider
(c)	Closing stock as per Average Stock method
		Purchase			Sale			Balance
S/n	Particulars	Units	Rate in $	Value in $	Units	Rate in $	Value in $	Units	Rate in $	Value in $
a	Beginning inventory	1000	$        100	$       1,00,000	-	-	-	-	-	-
b	inventory Purchased	2000	$        150	$       3,00,000	-	-	-	-	-	-
c	Total of Inventory Before sale (Note 4)	3000	$ 133.33	$       4,00,000	-	-	-	-	-	-
d	Sale during the year (Note 4)	-	-	-	1600	$ 133.33	$ 2,13,333.33	-	-	-
e	Closing stock as per Average stock method							1400	$     133.33	$ 1,86,667
(Note 4)	Under Average inventory stock method, at the time of sale, all selling inventory will consider together and selling rate will take for average value of all purchased inventory and opening inventory with their corresponding units. (As per answer 1)
	In this case for sale, average rate will consider, for the calculation of average rate total value of purchase and opening balance divided by total units
	For closing stock valuation units sold deducted from total units available for sale and multiplied with average rate of inventory