Question

Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions	Units			Unit Cost
a. Inventory, Beginning		1,500		$	30
For the year:
b. Purchase, March 5		7,500			31
c. Purchase, September 19		3,500			33
d. Sale, April 15 (sold for $75 per unit)		2,400
e. Sale, October 31 (sold for $78 per unit)		6,500
f. Operating expenses (excluding income tax expense), $406,000

Required:

1.	Calculate the number and cost of goods available for sale.

2.	Calculate the number of units in ending inventory.

3.	Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost.

4.	Prepare an income statement that shows the FIFO method, LIFO method and weighted average method.

Answer 1

1) Calculate the number and cost of goods available for sale

	Units	Unit Cost	Total Cost
Beginning inventory	1500	30	45000
Purchase 1	7500	31	232500
Purchase 2	3500	33	115500
Total	12500		393000

Number of goods available for sale = 12500

Cost of goods available for sale = 393000

2) Ending inventory = 12500-8900 = 3600 Units

3) Calculate ending inventory and cost of goods sold

	FIFO	LIFO	Weighted average
ending inventory	(3500*33+100*31) = 118600	(1500*30+2100*31) = 110100	393000/12500*3600 = 113184
Cost of goods sold	393000-118600 = 274400	393000-110100 = 282900	393000-113184 = 279816

4) Income statement

	FIFO	LIFO	Weighted average
Sales	687000	687000	687000
Cost of goods sold	274400	282900	279816
Gross profit	412600	40410	407184
Operating expense	406000	406000	406000
Income from operation	6600	-1900	1184