Question

Nittany Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 1: Units 1,850 Unit Cost $ 7 Inventory, December 31, prior year For the current year: Purchase, March 21 Purchase, August 1 Inventory, December 31, current year 5,090 2,910 4,040 9 10 Required: Compute ending inventory and cost of goods sold for the current year under FIFO, LIFO, and average cost inventory costing methods. (Round "Average cost per unit" to 2 decimal places and final answers to nearest whole dollar amount.) FIFO LIFO Average Cost Ending inventory Cost of goods sold

Answer 1

Ans:

Calculation of units sold:

1850 op. bal+5090 Pur. in march+2910 pur. in Aug.-4040 closing bal.= 5810 units slod during the year.

1. FIFO method:

Cost of goods sold. First ones purchased are sold first.

So total cost of goods sold is (1850@ $7)+(3960@ $9)= $ 48,590

Ending inventory value is :

(1130 @ 9) + (2910@ $ 10)= $39,270

2. LIFO method:

Cost of goods sold. Last ones purchased are sold first.

So total values of goods sold is (2910 @ $10)+(2900 @ $9)= $55,200

Ending inventory value is :

(2190 @ 9) + (1850 @ $ 7)= $32,660

3. Average cost of inventory:

Opening inventory (1850 @ $7) + Pur. on Mar.21 (5090 @ $9) + Pur. on Aug.1 (2910 @ 10)= Total value is $87,860.

Total units is 1850+5090+2910= 9850

Avg. cost is $87860/9850 (units)= $8.91979695 per units.

So Cost of goods sold is 5810 @ $8.91979695 = $51824

Ending Inventory value is 4040 @ $8.91979695 = $36,036

Hope this helped ! Let me know in case of any queries.