Question

7 11.11 points Nittany Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 1: Units Unit Cost Inventory, December 31, prior year 1,840 For the current year: Purchase, March 21 5,050 6 Purchase, August 1 2,940 Inventory, December 31, current year Required: Compute ending inventory and cost of goods sold for the current year under FIFO, LIFO, and average cost inventory costing methods. (Round "Average cost per unit" to 2 decimal places and final answers to nearest whole dollar amount.) Answer is complete but not entirely correct. FIFO LIFO Average Cost 21,160 27,780 $ 24,508 $ 37,080 $ 30,460 $ 33,712 Ending inventory Cost of goods sold

Answer 1

Answer:

FIFO LIFO Ending Inventory $27,780 $21,160 Cost of Goods Sold $30,460 $37,080 Average Cost $24,509 $33,731

Explanation:

A)FIFO:

as per FIFO ending inventory must be from last purchases:

Thus; out of 4140 units:

2940@$7=$20,580

1200@$6=$7,200

Total=20580+7200=$27,780

and COGS must be from initial inventory:

Thus;

1840@$4=$7,360

3850@$6=$23,100

Total=7360+23100=$30,460

B)LIFO:

As per LIFO ending inventory must be from first purchases:

Thus; out of 4140 units:

1840@$4=$7,360

2300@$6=$13,800

Total=7360+19260=$21,160

and COGS must be from last inventory:

Thus;

2940@$7=$20,580

2750@$6=$16,500

Total=20580+16500=$37,080

c)Average cost method:

Average cost per unit=Total cost of inventory/units available for sale=(1840*4)+(5050*6)+(2940*7) / (1840+5050+2940)=(7360+30300+20580)/(9830)=58240/9830=$5.92

Ending inventory=4140*5.92=$24,508.80 or $24,509

COGS=Total Cost-Ending Inventory=58240-24509=$33,731 (can also be calculated as (9830-4140)*5.92=$33685, difference due to rounding off)

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