Question

E8.18 (LO3,5) (FIFO, LIFO, and Average-Cost Determination) Keyser Company's record of transactions for the month of April is as follows.

Purchases					Sales
April	1 (balance on hand)	600	@	$6.00	April	3	500	@	$10.00
	4	1,500	@	6.08		9	1,300	@	10.00
	8	800	@	6.40		11	600	@	11.00
	13	1,200	@	6.50		23	1,200	@	11.00
	21	700	@	6.60		27	900	@	12.00
	29	500	@	6.79			4,500
		5,300

Instructions

a. Assuming that periodic inventory records are kept, compute the inventory at April 30 using (1) LIFO and (2) average-cost.

b. Assuming that perpetual inventory records are kept in both units and dollars, determine the inventory at April 30 using (1) FIFO and (2) LIFO.

c. Compute cost of goods sold assuming periodic inventory procedures and inventory priced at FIFO.

d. In an inflationary period, which inventory method—FIFO, LIFO, or average-cost—will show the highest net income?

Answer 1

a (1) Inventory at April 30, using LIFO
	Units	Rate	Value
Beginning Inventory	600	$6.00	$3,600.00
Inventory from April 4	200	$6.08	$1,216.00
a (2) Inventory at April 30, using Average-Cost
	Units	Rate	Value
Ending Inventory (See Workings)	800	$6.67	$5,333.96
Working 1
Beginning Inventory	600	units
Purchase	4700	units
Total	5300	units
Sold	-4500	units
Ending Inventory	800	units
Average Cost
Date	Purchase			Cost of Goods Sold			Inventory on Hand
	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Apr.1							600	$6	$3,600
Apr.3				500	$6	$3,000	100	$6	$600
Apr.4	1500	$6.08	$9,120				1600	$6.08	$9,720	($600 + $1500)/1600
Apr.8	800	6.4	$5,120				2400	$6.18	$14,840	($9720 + $5120)/2400
Apr.9				1300	$6.18	$8,038	1100	$6.18	$6,802
Apr.11				600	$6.18	$3,710	500	$6.18	$3,092
Apr.13	1200	$6.50	$7,800				1700	$6.41	$10,892	($3092 + $7800)/1700
Apr.21	700	$6.60	$4,620				2400	$6.46	$15,512	($10892 + $4620)/2400
Apr.23				1200	$6.46	$7,756	1200	$6.46	$7,756
Apr.27				900	$6.46	$5,817	300	$6.46	$1,939
Apr.29	500	$6.79	$3,395				800	$6.67	$5,334	($1939 + $3395)/800
Totals	4700		$30,055	4500		$28,321	800		$5,334

b. Ending Inventory using FIFO & LIFO

FIFO

Beginning Inventory

Inventory from April 4

LIFO

Ending Inventory

Ending Inventory

Total

C. Cost of Goods Sold

d. In inflanatory period, FIFO method will show the highest Income. As Cost of Goods Sold is less in FIFO method as compared to LIFO & Average method

Working FIFO
Date	Purchase			Cost of Goods Sold			Inventory on Hand
	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Apr.1							600	$6	$3,600
Apr.3				500	$6	$3,000	100	$6	$600
Apr.4	1500	$6.08	$9,120				100	$6.00	$600
							1500	$6.08	$9,120
Apr.8	800	6.4	$5,120				100	$6.00	$600
							1500	$6.08	$9,120
							800	$6.40	$5,120
Apr.9				100	$6.00	$600	0	$6.00	$0
				1200	$6.08	$7,296	300	$6.08	$1,824
							800	$6.40	$5,120
Apr.11				300	$6.08	$1,824	0	$6.08
				300	$6.40	$1,920	500	$6.40	$3,200
Apr.13	1200	$6.50	$7,800				500	$6.40	$3,200
							1200	$6.50	$7,800
Apr.21	700	$6.60	$4,620				500	$6.40	$3,200
							1200	$6.50	$7,800
							700	$6.60	$4,620
Apr.23				500	$6.40	$3,200	0	$6.40	$0
				700	$6.50	$4,550	500	$6.50	$3,250
							700	$6.60	$4,620
Apr.27				500	$6.50	$3,250	0	$6.50	$0
				400	$6.60	$2,640	300	$6.60	$1,980
Apr.29	500	$6.79	$3,395				300	$6.60	$1,980
							500	$6.79	$3,395
Totals	4700		$30,055	4500		$28,280	800		$5,375