Question

Brief Exercise 6-5 Calculate ending Inventory and cost of goods sold using FIFO (L06-3) During the year, Wright Company sells 490 remote-control airplanes for $120 each. The company has the following inventory purchase transactions for the year Jan. 1 May. 5 Nov 3 Transaction Beginning inventory Purchase Purchase Number of U nits 4 0 270 220 Unit Cost $68 71 7 6 Total Cost $ 2,720 19,170 16, 720 $38, 610 Calculate ending inventory and cost of goods sold for the year, assuming the company uses FIFO. FIFO Cost of Goods Available for Sale of costruit Cost of Goods of units Available for sale units 40 Cost of Goods Sold Ending Inventory Cost of of Ending Openloads Saldunits cost per unit unter

Answer 1

Case 1)

1) calculate ending inventory and cost of goods sold under( FIFO METHOD)

Cost of goods sold

Date	particular	no of units	unit cost	amount($)
Jan 1st	beginning inventory	40	$68	2720
May 5th	purchases	270	$71	19170
Nov 3rd	purchases	180	$76	13680
	Cost of goods sold	490		35570

2) calculate ending inventory(under FIFO METHOD)

Ending inventory = beginning INVENTORY + purchases- unit's sold

   =40+(270+220)-490= 40

40 × $76= $3040

Ending inventory =. $3040

Case 2) calculation cost of goods sold and ending inventory (LIFO METHOD)

COST OF GOODS SOLD

Date	particular	unit's	unit cost	amount($)
Jan 1	Beginning	15	$81	1215
May 5	Purchases	245	$84	20580
Nov 3	Purchases	190	$89	16910
	Cost of goods sold	450		38705

Ending inventory(LIFO METHOD)

   50+(245+190)-450 = 35UNITS

BECAUSE WE USING LIFO METHOD , ENDING INVENTORY WILL BE IN BEGINNING BALANCE (JAN1ST) THEREFORE,.

   35UNITS ×$81 =$2835

Ending inventory = $2835

Case 3) calculation of cost of goods sold and ending inventory under specific identification method

Cost of goods sold

Date	particular	UNIT	unit cost	amount ($)
Jan 1	beginning inventory	50	$64	3200
May 5	purchases	275	$67	18425
Nov 3	purchases	225	$72	16200
	Cost of goods sold	550		37825

Ending inventory(under specific identification method)

Date	particular	UNIT	unit cost	amount ($)
Jan 1	beginning balance	0	-	-
May5	purchases	15	$67	1005
Nov 3	purchases	15	$72	1080
	Ending inventory	30		2085

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