Question

Aug. 13 Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods The units of an item available for sale during the year were as follows: Jan. 1 Inventory 7 units at $29 $203 Purchase 13 units at $30 390 Nov. 30 Purchase 13 units at $32 416 Available for sale 33 units $1,009 There are 20 units of the item in the physical inventory at December 31. The periodic Inventory system is used. Determine the inventory cost using the (a) first-in, first-out (FIFO) method; (b) last-in, first-out (LIFO) method; and (c) weighted average cost method (round per-unit cost to two decimal places and your final answer to the nearest whole dollar). First-In, first-out (FIFO) b. Last-in, first-out (LIFO) Weighted average cost C.

Answer 1

Periodic Inventory System

The periodic inventory system is a method of inventory valuation for financial reporting purposes in which a physical count of the inventory is performed at specific intervals. This accounting method takes inventory at the beginning of a period, adds new inventory purchases during the period and deducts ending inventory to derive the cost of goods sold (COGS).

Number of physical Inventory at december 31= 20 units

Total Cost of units available for sale= $1009

a.FIFO(First in First out) method

FIFO is an inventory costing method that assumes that the first items placed in inventory are the first sold. Thus, the inventory at the end of a year consists of the goods most recently placed in inventory.

Cost of ending inventory

Most recent cost, November 30

13 units @ 32 $ 416

Add Next most recent cost ,August 13

7 units @ 30 $210

Total cost of ending inventory of 20 units $626

Total inventory cost= Cost of units available for sale- cost of ending inventory

= 1009-626=$383

b.LIFO(Last in first out) method

LIFO  is an inventory valuation method which assumes that the last items placed in inventory are the first sold during an accounting year.

Cost of ending inventory

Earlier cost ,january 1

7 units @ 29 $203

Add   Next Earliest cost ,august 13

13 units @ 30 $390

Total cost of ending inventory of 20 units $593

Total inventory cost= Cost of units available for sale- cost of ending inventory

= 1009-593=$416

c.Weighted average cost method

When average costing method is used in a periodic inventory system, the cost of goods sold and the cost of ending inventory is computed using weighted average unit cost. Weighted average unit cost is computed using the following formula

Weighted average unit cost = Total cost of units available for sale / Number of units available for sale

= 1009/33 =$30.575

Cost of Ending inventory of 20 units= 20* 30.575

= $611.515

Cost of Goods available for sale of 33units= 33*30.575

= $1008.975

Total inventory cost= Cost of units available for sale- cost of ending inventory

1008.975-611.515=$397.46

  

Answer 2