Question

Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods The units of an item available for sale during the year were as follows:

Jan. 1 Inventory 7 units at $33 $231

Aug. 7 Purchase 17 units at $36 612

Dec. 11 Purchase 13 units at $38 494

37 units $1,337.

There are 17 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method (round per unit cost to two decimal places and your final answer to the nearest whole dollar).

a. First-in, first-out (FIFO) $

b. Last-in, first-out (LIFO) $

c. Weighted average cost $

Answer 1

Periodic inventory system updates inventory records only at the end of reporting period concerned. FIFO stands for First In First Out which means that cost of goods sold must consider cost of those goods earlier. As a result, ending inventory will contain cost of recent purchases. 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 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. a) Under FIFO: DATA TABLE: Units 7 Rate $33 Amount $231 [7 units x $330] Ending inventory of 17 units shall consist of 13 units from Dec. 11's purchase and bal. 4 units from Aug. 7's purchase. Beg. Bal. Purchases: On Aug. 7 On Dec. 11 17 13 $36 $38 $612 $494 [17 units x $36.00] [13 units x $380] From Aug. 7 purchase From Dec. 11 purchase Cost of Ending inventory $144 [4 units x $36] $494 [13 units x $38] $638 37 $1,337 Available for sale Units sold Ending inventory 20 (37 - 17] 17 [Given]

b) Under LIFO: c) Under Weighted Average Method: Ending inventory of 17 units shall consist of 7 units from Beg. Bal. and bal. 10 units from Aug. 7's purchase. Ending inventory of 17 units shall consist of 17 units from entire lot. Therefore, From Beg. Bal. From Aug. 7 purchase Cost of Ending inventory $231 [7 units x $33] $360 [10 units x $36] $591 Available for sale - Dollar value Available for sale - Units Weighted Average cost per unit # of units in ending inventory Cost of Ending inventory $1,337 (Ref: Data Table] 37 (Ref: Data Table] $36.14 ($1337/37] 17 $614 [17 units x $36.14]