Question

Aircard Corporation tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period as if it uses a periodic inventory system. The following are the transactions for the month of July. Unit Cost $20 July 1 July 5 July 13 July 17 July 25 July 27 Beginning Inventory Sold Purchased Bold Purchased Sold Units 2.000 1,000 6,000 3.000 8.000 5,000 Calculate the cost of goods available for sale, ending Inventory, and cost of goods sold if Aircard uses (0) FIFO, (b) LIFO, or (c) weighted average cost. (Round "Cost per Unit" to 2 decimal places.) FIFO LIFO Weighted Average Cost Cost of Goods Available for Sale Ending Inventory Cost of Goods Sold

Answer 1

Ans.		FIFO	LIFO	Weighted Average Cost
	Cost of goods available for sale	$364,000	$364,000	$364,000
	Ending inventory	$168,000	$150,000	$159,250
	Cost of goods sold	$196,000	$214,000	$204,750
	*Working Notes:
Ans. 1		Cost of goods available for sale
		Units	Cost per unit	Total cost
	Beginning inventory	2000	$20.00	$40,000
	Purchases:
	13-Jul	6000	$22.00	$132,000
	25-Jul	8000	$24.00	$192,000
	Available for sale	16000		$364,000
Ans. 2	Total units sold (1,000 + 3,000 + 5,000)   =    9,000 units
	Ending inventory units = Units available for sale - Total units sold
	16,000 - 9,000
	7,000 units
Ans. 3 a	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	2000	$20.00	$40,000	2000	$20.00	$40,000	0	$20.00	$0
	Purchases:
	13-Jul	6000	$22.00	$132,000	6000	$22.00	$132,000	0	$22.00	$0
	25-Jul	8000	$24.00	$192,000	1000	$24.00	$24,000	7000	$24.00	$168,000
	Total	16000		$364,000	9000		$196,000	7000		$168,000
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
Ans. 3 b	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	2000	$20.00	$40,000	0	$20.00	$0	2000	$20.00	$40,000
	Purchases:
	11-Apr	6000	$22.00	$132,000	1000	$22.00	$22,000	5000	$22.00	$110,000
	01-Jun	8000	$24.00	$192,000	8000	$24.00	$192,000	0	$24.00	$0
	Total	16000		$364,000	9000		$214,000	7000		$150,000
	*In LIFO method the units that have purchased last, are released the first one and ending inventory units
	remain from the first purchase.
Ans. 3 c	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	2000	$20.00	$40,000
	Purchases:
	30-Jan	6000	$22.00	$132,000
	01-May	8000	$24.00	$192,000
	Total	16000		$364,000	9000	$22.75	$204,750	7000	$22.75	$159,250
	Average cost per unit =   Total cost of goods available for sale / Units available for sale
	$364,000 / 16,000
	$22.75	per unit