Ferris Company began 2018 with 8,000 units of its principal
product. The cost of each unit is $7. Merchandise transactions for
the month of January 2018 are as follows:
Purchases | |||||||||
Date of Purchase | Units | Unit Cost* | Total Cost | ||||||
Jan. 10 | 6,000 | $ | 8 | $ | 48,000 | ||||
Jan. 18 | 8,000 | 9 | 72,000 | ||||||
Totals | 14,000 | 120,000 | |||||||
*Includes purchase price and cost of freight.
Sales | ||
Date of Sale | Units | |
Jan. 5 | 4,000 | |
Jan. 12 | 2,000 | |
Jan. 20 | 5,000 | |
Total | 11,000 | |
11,000 units were on hand at the end of the month.
Required:
Calculate January's ending inventory and cost of goods sold for the
month using each of the following alternatives:
1. FIFO, periodic system.
2. LIFO, periodic system.
3. LIFO, perpetual system.
4. Average cost, periodic system.
5. Average cost, perpetual system.
Ans. 1 | Total units sold = 11,000 | ||||||||||
FIFO: | Cost of goods available for sale | Cost of goods sold - Periodic FIFO | Ending inventory - Periodic FIFO | ||||||||
Units | Rate | Total | Units | Rate | Total | Units | Rate | Total | |||
Beginning inventory | 8000 | $7.00 | $56,000 | 8000 | $7.00 | $56,000 | 0 | $7.00 | $0 | ||
Purchases: | |||||||||||
10-Jan | 6000 | $8.00 | $48,000 | 3000 | $8.00 | $24,000 | 3000 | $8.00 | $24,000 | ||
18-Jan | 8000 | $9.00 | $72,000 | 0 | $9.00 | 8000 | $9.00 | $72,000 | |||
Total | 22000 | $176,000 | 11000 | $80,000 | 11000 | $96,000 | |||||
*In FIFO method the units that have purchased first, are released the first one and the ending inventory units remain from the last purchases. | |||||||||||
Ans. 2 | LIFO: | Cost of goods available for sale | Cost of goods sold - Periodic LIFO | Ending inventory - Periodic LIFO | |||||||
Units | Rate | Total | Units | Rate | Total | Units | Rate | Total | |||
Beginning inventory | 8000 | $7.00 | $56,000 | 0 | $7.00 | $0 | 8000 | $7.00 | $56,000 | ||
Purchases: | |||||||||||
10-Jan | 6000 | $8.00 | $48,000 | 3000 | $8.00 | $24,000 | 3000 | $8.00 | $24,000 | ||
18-Jan | 8000 | $9.00 | $72,000 | 8000 | $9.00 | $72,000 | 0 | $9.00 | $0 | ||
Total | 22000 | $176,000 | 11000 | $96,000 | 11000 | $80,000 | |||||
*In LIFO method the units that have purchased last, are released the first one and ending inventory units remains from the first purchases. | |||||||||||
Ans. 3 | LIFO Perpetual | Purchase | Cost of goods sold | Balance | |||||||
Date | Quantity | Rate | Total cost | Quantity | Rate | Total cost | Quantity | Rate | Total cost | ||
01-Jan | 8000 | $7.00 | $56,000 | 8000 | $7.00 | $56,000 | |||||
05-Jan | 4000 | $7.00 | $28,000 | 4000 | $7.00 | $28,000 | |||||
10-Jan | 6000 | $8.00 | $48,000 | 4000 | $7.00 | $28,000 | |||||
6000 | $8.00 | $48,000 | |||||||||
12-Jan | 2000 | $8.00 | $16,000 | 4000 | $7.00 | $32,000 | |||||
4000 | $8.00 | $32,000 | |||||||||
18-Jan | 8000 | $9.00 | $72,000 | 4000 | $7.00 | $32,000 | |||||
4000 | $8.00 | $32,000 | |||||||||
8000 | $9.00 | $72,000 | |||||||||
20-Jan | 5000 | $9.00 | $45,000 | 4000 | $7.00 | $28,000 | |||||
4000 | $8.00 | $32,000 | |||||||||
3000 | $9.00 | $27,000 | |||||||||
Total | Cost of goods sold | $89,000 | Cost of Ending inventory | $87,000 |
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