Question

Exercise 8-13 (Static) Inventory cost flow methods; periodic system (LO8-1, 8-4 Altira Corporation provides the following information related to its merchandise inventory during the month of August 2021: Aug.1 Inventory on hand-2,000 units; cost $5.30 each. 8 Purchased 8,000 units for $5.50 each. 14 Sold 6,000 units for $12.00 each. 18 Purchased 6,000 units for $5.60 each. 25 Sold 7,000 units for $11.00 each. 28 Purchased 4,000 units for $5.80 each. 31 Inventory on hand-7,000 units. Required: Using calculations based on a periodic inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using each of the following cost flow methods.

Answer 1

1
FIFO	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	# of units	Cost per unit	Total	# of units	Cost per unit	Total	# of units	Cost per unit	Total
Beginning inventory	2000	5.30	10600	2000	5.30	10600	0	5.30	0
Purchases:
August 8	8000	5.50	44000	8000	5.50	44000	0	5.50	0
August 18	6000	5.60	33600	3000	5.60	16800	3000	5.60	16800
August 28	4000	5.80	23200	0	5.80	0	4000	5.80	23200
Total	20000		111400	13000		71400	7000		40000
2
LIFO	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	# of units	Cost per unit	Total	# of units	Cost per unit	Total	# of units	Cost per unit	Total
Beginning inventory	2000	5.30	10600	0	5.30	0	2000	5.30	10600
Purchases:
August 8	8000	5.50	44000	3000	5.50	16500	5000	5.50	27500
August 18	6000	5.60	33600	6000	5.60	33600	0	5.60	0
August 28	4000	5.80	23200	4000	5.80	23200	0	5.80	0
Total	20000		111400	13000		73300	7000		38100
3
Average cost	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	# of units	Cost per unit	Total	# of units	Cost per unit	Total	# of units	Cost per unit	Total
Beginning inventory	2000	5.30	10600
Purchases:
August 8	8000	5.50	44000
August 18	6000	5.60	33600
August 28	4000	5.80	23200
Total	20000	5.57	111400	13000	5.57	72410	7000	5.57	38990
Average cost = 111400/20000 = $5.57