Question

Consider the following Information for Maynor Company, which uses a perlodic Inventory system: Transaction Beginning Inventory Purchase ITI Units Unit Cost Total Cost S B5 $ 2,975 January 1 March 28 35 4,095 6, 650 45 91 August 22 Purchase 70 95 75 7,575 October 14 Purchase 101 225 $21, 295 Goods Available for Sale The company sold 75 units on May 1 and 70 units on October 28. Required: Calculate the company's ending Inventory and cost of goods sold using the each of following Inventory costing methods. a. FIFO b. LIFO c. Welghted Average

Answer 1

			Ending Inventory	Cost of goods sold
a.	FIFO		$    8,050	$ 13,245
b.	LIFO		$    7,070	$ 14,225
c.	Weighted Average		$    7,572	$ 13,723
Working:
Under periodic inventory method, inventory records are updated at the end of period.
FIFO:
FIFO stands for first in first out.It means inventory which is bought first is recorded as sold first.
So, cost of goods sold is calculated as follows:
	Date	Activity	Quantity	Unit Price		Cost of goods sold
			a	b		c=a*b
	January 1	Beginning Inventory	35	$          85		$         2,975
	March 28	Purchase	40	$          91		$         3,640
		Total (a)	75			$         6,615
	March 28	Purchase	5	$          91		$             455
	August 22	Purchase	65	95		$         6,175
		Total (b)	70			$         6,630
		Sub-total (a) + (b)	145			$       13,245
Ending inventory is calculated as follows:
				Units		Cost
	Cost of goods available for sale			225		$       21,295
	Cost of goods sold			145		$       13,245
	Cost of ending inventory			80		$         8,050
LIFO:
LIFO stands for last in first out.It means inventory which is bought last is recorded as sold first.
So, cost of goods sold is calculated as follows:
	Date	Activity	Quantity	Unit Price		Cost of goods sold
			a	b		c=a*b
	October 14	Purchase	75	$        101		$         7,575
		Total (a)	75			$         7,575
	August 22	Purchase	70	95		$         6,650
		Total (b)	70			$         6,650
		Sub-total (a) + (b)	145			$       14,225
Ending inventory is calculated as follows:
				Units		Cost
	Cost of goods available for sale			225		$       21,295
	Cost of goods sold			145		$       14,225
	Cost of ending inventory			80		$         7,070
Weighted Average:
Weighted average cost per unit		=	$ 21,295	/	225
		=	$    94.64
Cost of ending Inventory	=	80	*	$    94.64	=	$         7,572
Cost of goods sold	=	145	*	$    94.64	=	$       13,723