Question

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 30 units @ $106 per unit Mar. 10 Purchase 70 units @ $118 per unit Aug. 30 Purchase 10 units @ $124 per unit Dec. 12 Purchase 90 units @ $130 per unit There are 60 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, presenting your answers in the form below. Round the average cost per unit to the nearest cent and round your final answers to the nearest whole dollar. Hide Schedule of Cost of Merchandise Inventory and Cost of Merchandise Sold Inventory Method Merchandise Inventory Merchandise Sold a. FIFO b. LIFO c. Average cost

Answer 1

Ans.
	Schedule of Cost of Merchandise Inventory and Cost of Merchandise Sold
	Inventory Method	Merchandise Inventory	Merchandise Sold
	FIFO	$7,800	$16,580
	LIFO	$6,720	$17,660
	Average Cost	$7,314	$17,066
	*WORKING   NOTES:
	Ending inventory units = 60
	Units sold = Total units available - Ending inventory units
	(30 + 70 + 10 + 90) - 60
	200 - 60   =   140 units
	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	30	$106	$3,180	30	$106	$3,180	0	$106	$0
	Purchases:
	10-Mar	70	$118	$8,260	70	$118	$8,260	0	$118	$0
	30-Aug	10	$124	$1,240	10	$124	$1,240	0	$124	$0
	12-Dec	90	$130	$11,700	30	$130	$3,900	60	$130	$7,800
	Total	200		$24,380	140		$16,580	0		$7,800
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
	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	30	$106	$3,180	0	$50.00	$0	30	$106	$3,180
	Purchases:
	10-Mar	70	$118	$8,260	40	$118	$4,720	30	$118	$3,540
	30-Aug	10	$124	$1,240	10	$124	$1,240	0	$124	$0
	12-Dec	90	$130	$11,700	90	$130	$11,700	0	$130	$0
	Total	200		$24,380	140		$17,660	60		$6,720
	*In LIFO method the units that have purchased last, are released the first one and ending inventory units
	remain from the first purchase.
	Average cost:	Cost of goods available for sale			Cost of goods sold - Periodic Average cost			Ending inventory - Periodic Average cost
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beginning inventory	30	$106	$3,180
	Purchases:
	10-Mar	70	$118	$8,260
	30-Aug	10	$124	$1,240
	12-Dec	90	$130	$11,700
	Total	200		$24,380	140	$121.90	$17,066	60	$121.90	$7,314
	Average cost per unit =   Total cost of goods available for sale / Units available for sale
	$24,380 / 200
	$121.90	per unit