Question

Periodic Method: Computing Inventory Using LIFO, FIFO, WA, and SI; Financial Statement Impacts; and Inventory Errors Craig Company buys and sells one product. Its beginning inventory, purchases, and sales during calendar-year 2018 follow. Date Activity Beg. inventory Sale Units Acquired at Cost 400 units @ $14 = $ 5,600 200 units @ $15 = $ 3,000 Jan. 1 Jan. 15 Mar. 10 Apr. 1 May 9 Sep. 22 Nov. 1 Nov. 28 Purchase Sale Purchase Units Sold at Retail Unit Inventory 400 units 200 units @ $30 200 units 400 units 200 units @ $30 200 units 500 units 750 units 300 units @ $35 450 units 550 units 700 units 300 units @ $16 = $ 4,800 250 units @ $20 = $ 5.000 Purchase Sale Purchase 100 units @ $21 = $ 2.100 1.250 units $20.500 Totals

Additional tracking data for specific identification: (1) January 15 sale—200 units @ $14, (2) April 1 sale—200 units @ $15, and (3) November 1 sale—200 units @ $14 and 100 units @ $20.

(1.) What is the Cost of Good Available for Sale ? How many units available for sale? (1 point)

(2.) Using the Periodic System, determine Cost of Goods Sold (COGS) and Ending Inventory using one of the methods: Specific Identification, Weighted Average, FIFO or LIFO. Show your work. (3 Points)

(3.) Explain how the calculation might be different if you used Perpetual System instead. (1 point)

Answer 1

1) Cost of goods available for sale $20,500 Units available for sale 1,250 Units 2) Periodic Inventory System Specific identification method $10,600 $9,900 Weighted average method $11,480 $9,020 Cost of goods sold Ending Inventory FIFO $10,200 $10,300 LIFO $12,650 $7,850 3) In case of Perpetual Inventory system transaction is updated and recorded after each and every transaction For example in weighted average method, The average price will be calculated after each and every purchase This weighted average rate will use be used for subsequent issue to cost of goods sold Working notes: Specific identification inventory costing method Goods Available for sale Cost of Goods sold Unit Date Activity Quantity Total Cost Units sold Unit Cost COGS Cost 400 200 $14 $15 $5,600 $3,000 Jan 1 Mar 10 May 9 Sep 22 Nov 28 Beginning inventory Purchase Purchase Purchase Purchase Totals 400 200 300 250 100 1,250 $14 $15 $16 $20 $21 $5,600 $3,000 $4,800 $5,000 $2,100 $20,500 Inventory on Hand Ending Unit Units Inventory Cost Value 0 $14 $0 0 $15 $0 300 $16 $4,800 150 $20 $3,000 100 $21 $2,100 550 $9,900 100 $20 $2,000 700 $10,600 Weighted average method Total Cost Cost of Goods sold # of Unit COGS Units sold Cost Inventory on Hand # of Unit Inventory Units Cost Balance $5,600 Jan 1 Mar 10 May 9 Sep 22 Nov 28 Beginning inventory Purchase Purchase Purchase Purchase # of Units 400 200 300 250 100 1,250 Purchase Unit Cost $14.00 $15.00 $16.00 $20.00 $21.00 $16.40 $3,000 $4,800 $5,000 $2,100 $20,500 700 $16.40 $11,480 Sales Ending Inventory 550 550 $16.40 $16.40 $9,0201 $9,020 Totals 700 $11,4801 FIFO method Cost of Goods sold # of Unit COGS Units sold Cost Inventory on Hand # of Unit Inventory Units Cost Balance Date Jan 1 Mar 10 May 9 Sep 22 Nov 28 # of Units 400 200 300 Beginning inventory Purchase Purchase Purchase Purchase Sales Purchase Unit Cost $14 $15 $16 $20 $21 Total Cost $5,600 $3,000 $4,800 $5,000 $2,100 250 100 400 200 100 $14 $15 $16 $5,600 $3,000 $1,600 200 250 100 550 $16 $20 $21 $3,200 $5,000 $2,100 $10,300 Ending Inventory Totals 1,250 $20,500 700 $10,200 LIFO Method #of Units Cost of Goods sold #of Unit Units sold Cost COGS Inventory on Hand #of Unit Inventory Units Cost Balance 400 Jan 1 Mar 10 May 9 Sep 22 Nov 28 Beginning inventory Purchase Purchase Purchase Purchase Sales Purchase Unit Cost $14 $15 $16 $20 200 300 250 Total Cost $5,600 $3,000 $4,800 $5,000 $2,100 100 $21 100 250 300 $21.00 $20.00 $16.00 $15.00 $2,100 $5,000 $4,800 $750 50 150 400 550 $15 $14 $2,250 $5,600 Totals 1,250 $20,500 700 $12,650 $7,850