Question

Sandhill Co. began operations on July 1. It uses a perpetual inventory system. During July, the company had the following purchases and sales. Purchases Date Units Unit Cost Sales Units July 1 5 $170 July 6 3 July 11 6 $184 July 14 5 July 21 7 $195 July 27 5.... Determine the ending inventory under a perpetual inventory system using (1) FIFO, (2) moving-average cost, and (3) LIFO. (Round average-cost per unit to 2 decimal places, e.g. 12.52 and final answer to 0 decimal places, e.g. 1,250.) FIFO MOVING-AVERAGE LIFO The ending inventory under a perpetual inventory system $Entry field with incorrect answer now contains modified data $Entry field with incorrect answer now contains modified data $Entry field with incorrect answer now contains modified data

Answer 1

FIFO Method: FIFO stands for First In First Out which means that cost of goods sold must consider cost of those goods initially. As a result, ending inventory will contain cost of recent purchases. Under perpetual method, inventory records are updated continously. Ending Inventory Purchases Cost of Goods Sold Units Units Units Rate Amount Rate Amount Rate Amount $170.00 $850 $170.00 $850 Jul. 1 $170.00 $510 $170.00 $340 Jul. 6 Jul. 11 $340 $1,104 $1,444 $184.00 $1,104 $170.00 $184.00 $340 $552 $892 $170.00 $184.00 Jul. 14 $184.00 $552 3 Jul. 21 $552 $1,365 $1,917 $195.00 $1,365 $184.00 $195.00 3. 10 $184.00 $195.00 $552 $390 $942 $2,344 (Cost of Goods Sold) Jul. 27 $195.00 $975 $975 (Ending Inventory) 5 13

Moving (or Weighted) Average Method: Under moving (=weighted) average inventory method, total value of purchases shall be divided by total number of units purchased to calculate unit cost. Cost of goods sold shall be calculated by multiplying number of units sold by unit cost calculated just before the date of sale perpetully. Ending Inventory Purchases Cost of Goods Sold Units Units Units Rate Amount Rate Amount Rate Amount $0 Jul. 1 $0.00 $170.00 $170.00 $180.50 $180.50 $190.65 $190.65 $170.00 $850 $850 [Rate = $850 / $170] $340 [Rate = $340/ $170] $1,444 [Rate = $1444 / $180.5] $542 [Rate = $542 / $180.5] Jul. 1 Jul. 6 $170.00 $510 Jul. 11 $184.00 $1,104 $180.50 $903 Jul. 14 3 $195.00 $1,365 $1,907 [Rate = $1907 / $190.65] $953 [Rate = $953 / $190.65] Jul. 21 10 Jul. 27 $190.65 $953 5 $1,413 (Total Cost of Goods Sold) $190.65 $953 13 (Ending Inventory)

LIFO Method: LIFO stands for Last In First Out which means that cost of goods sold must consider cost of those goods recently. As a result, ending inventory will contain cost of initial purchases or beginning inventory. Under perpetual method, inventory records are updated continously. Cost of Goods Sold Ending Inventory Purchases Units Units Units Rate Amount Rate Amount Rate Amount $170.00 $850 $170.00 $850 Jul. 1 Jul. 6 $170.00 $510 $170.00 $340 3 Jul. 11 $184.00 $1,104 $170.00 $184.00 $340 $1,104 $1,444 2 6. $184.00 $920 $170.00 $184.00 $340 $184 $524 Jul. 14 Jul. 21 $195.00 $1,365 $170.00 $184.00 $195.00 $340 $184 $1,365 $1,889 2 10 $195.00 $975 $170.00 $184.00 $195.00 $340 $184 $390 $914 Jul. 27 2 $914 (Ending Inventory) $2,405 (Cost of Goods Sold) 13