Question

Problem 2: The accounting records of Redman Sporting Goods Inc., a wholesaler of various types of sports equipment, shows the following data regarding the purchases and sales of a particular model of baseball bat during the past year as follows: Units Cost per unit Beginning inventory 60 $28 Purchases: Apr 15 180 32 Jun 22 300 34 Sep 30 60 35 Nov 15 50 36 A physical count of inventory at the end of the period shows that 80 units are still on hand. Redman uses the periodic inventory system. Determine the cost that should be included in cost of goods sold and ending inventory if Redman uses the following: A. FIFO B. Moving Average C. LIFO

Answer 1

Solution

	FIFO	Average	LIFO
Ending Inventory	$           2,850	$             2,651	$              2,320
Cost of Goods Sold	$        18,690	$           18,889	$            19,220

Working

	Units	Cost per unit	value
Beginning Balance	60	$                   28.00	$ 1,680
Purchases
	180	$                   32.00	$ 5,760
	300	$                   34.00	$ 10,200
	60	$                   35.00	$ 2,100
	50	$                   36.00	$ 1,800
Cost of goods available for sale	650		$ 21,540

..

Average Cost of Inventory
Units	(A)	650
Total Cost	(B)	$ 21,540
Average Cost	(C=B/A)	$ 33.14

.

FIFO
Total Units Available for sale		650
Units Sold		570
Closing Stock in Units		80
Valuation
Ending Inventory	50	@	$             36.00	$ 1,800
	30	@	$             35.00	$ 1,050
Value Of Ending Inventory				$ 2,850
Cost of Goods sold	21540 minus 2850			$      18,690.00
LIFO
Total Units Available for sale		650
Units Sold		570
Closing Stock in Units		80
Valuation
Ending Inventory	60	@	$             28.00	$ 1,680
	20	@	$             32.00	$ 640
Value Of Ending Inventory				$              2,320
Cost of Goods sold	21540 minus 2320			$            19,220
Weighted Average method
Total Units Available for sale		650
Units Sold		570
Closing Stock in Units		80
Valuation
Ending Inventory	80	@	$             33.14	$              2,651
Value Of Ending Inventory				$              2,651
Cost of Goods sold	(Total Purchase and opening stock Minus Closing Stock)	$            18,889