Question

Periodic Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale during the year were as follows: Jan. 1 Inventory 50 units @ $106 Mar. 10 Purchase 60 units @ $116 Aug. 30 Purchase 20 units @ $120 Dec. 12 Purchase 70 units @ $122 There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar. Cost of Merchandise Inventory and Cost of Merchandise Sold Inventory Method Merchandise Inventory Merchandise Sold First-in, first-out (FIFO) $ $ Last-in, first-out (LIFO) Weighted average cost

Answer 1

Inventory Method	Cost of Merchandise sold	Cost of Merchandise Inventory
FIFO	$                                    13,460	$                                                  9,740
LIFO	$                                    14,420	$                                                  8,780
Weighted average	$                                    13,920	$                                                  9,280

Working:

FIFO
	No. of Units	Unit Price $	Total $
Beginning balance	50	106	5300
Purchases
March 10	60	116	6960
August 30	20	120	2400
December 12	70	122	8540
Total purchases	150		17900
Cost of goods available for sale	200		23200
Ending inventory (70 x $122) + (10 x $120)	80		9740
Cost of goods sold	120		13460

LIFO
	No. of Units	Unit Price $	Total $
Beginning balance	50	106	5300
Purchases
March 10	60	116	6960
August 30	20	120	2400
December 12	70	122	8540
Total purchases	150		17900
Cost of goods available for sale	200		23200
Ending inventory (50 x $106) + (30 x $116)	80		8780
Cost of goods sold	120		14420

Weighted average cost = $23200/200 = $116

Ending inventory = 80 x $116 = $9280

Cost of goods sold = 120 x $116 = $13920