Question

A company had the following purchases and sales during its first year of operations:

	Purchases	Sales
January:	10 units at $120	6 units
February:	20 units at $125	5 units
May:	15 units at $130	9 units
September:	12 units at $135	8 units
November	10 units at $140	13 units

On December 31, there were 26 units remaining in ending inventory. Using the PERPETUAL LIFO inventory valuation method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

A) $3,405

B)$3,270

C)$3,364

D)$5,400

On December 31, there were 26 units remaining in ending inventory. Using the PERIODIC LIFO inventory valuation method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)

A)$3,405

B)$3,270

C)$3,200

D)$3,364

E)$5,400

On December 31, there were 26 units remaining in ending inventory. Using the PERPETUAL FIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

A)$8,670

B)$3,540

C)$5,400

D)$5,130

E)$3,270

On December 31, there were 26 units remaining in ending inventory. Using the PERPETUAL LIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

A)$8,670

B)$5,400

C)$5,470

D)$5,130

E)$5,305

On December 31, there were 26 units remaining in ending inventory. Using the PERIODIC LIFO inventory valuation method, what is the value of cost of goods sold? (Assume all sales were made on the last day of the month.)

A)$8,670

B)$5,400

C)$5,470

D)$3,200

E)$5,130

Answer 1

Requirement 1 - Option (B) is Correct LIFO Method Perpetual inventory Record Date Purchases Cost of goods sold Quantity unit cost Total cost Quantity unit cost Total cost Jan-01 10 $120.00 $ 1,200.00 Inventory Quantity unit cost total cost 10 $ 120.00 $ 1,200.00 Jan-31 6 $ 120.00 $ 720.00 4 $120.00 $ 480.00 Feb-01 20 $125.00 $ 2,500.00 4 $ 120.00 20 $125.00 $ $ 480.00 2,500.00 Feb-28 5 $ 125.00 $ 625.00 4 $ 120.00 15 $ 125.00 $ $ 480.00 1,875.00 01 - May 15 $130.00 $ 1,950.00 4 $120.00 15 $ 125.00 15 $ 130.00 $ $ $ 480.00 1,875.00 1,950.00 31 - May 9$ 130.00 $ 1,170.00 4 $ 120.00 15 $ 125.00 6 $ 130.00 $ $ $ 480.00 1,875.00 780.00 Sep-01 12 $135.00 $ 1,620.00 4 $ 120.00 15 $ 125.00 6 $ 130.00 12 $135.00 $ $ $ $ 480.00 1,875.00 780.00 1,620.00 Sep-30 8 $ 135.00 $ 1,080.00 4 $ 120.00 15 $125.00 6 $ 130.00 4 $135.00 $ $ $ $ 480.00 1,875.00 780.00 540.00 01 - Nov 10 $140.00 $ 1,400.00 4 $120.00 $ 15 $ 125.00 $ 6 $ 130.00 $ 4 $135.00 $ 10 $ 140.00 $ 480.00 1,875.00 780.00 540.00 1,400.00 Nov-30 10 $ 140.00 3 $135.00 $ $ 1,400 405 4 $ 120.00 $ 15 $ 125.00 $ 6 $ 130.00 $ 1 $135.00 $ 480.00 1,875.00 780.00 135.00 $ 3,270

Requirement 4 - Option (B) is Correct LIFO Method Perpetual inventory Record Date Purchases Cost of goods sold Quantity unit cost Total cost Quantity unit cost Total cost Jan-01 10 $120.00 $ 1,200.00 Inventory Quantity unit cost total cost 10 $ 120.00 $ 1,200.00 Jan-31 6 $ 120.00 $ 720.00 4 $ 120.00 $ 480.00 Feb-01 20 $125.00 $ 2,500.00 4 $ 120.00 $ 20 $ 125.00 $ 480.00 2,500.00 Feb-28 5 $ 125.00 $ 625.00 4 $ 120.00 15 $ 125.00 $ $ 480.00 1,875.00 01 - May 15 $130.00 $ 1,950.00 4 $ 120.00 15 $ 125.00 15 $ 130.00 $ $ $ 480.00 1,875.00 1,950.00 31-May 9 $ 130.00 $ 1,170.00 4 $ 120.00 $ 15 $ 125.00 $ 6 $ 130.00 $ 480.00 1,875.00 780.00 Sep-01 12 $135.00 $ 1,620.00 4 $ 120.00 15 $ 125.00 6 $ 130.00 12 $ 135.00 $ $ $ $ 480.00 1,875.00 780.00 1,620.00 Sep-30 8 $ 135.00 $ 1,080.00 4 $ 120.00 $ 15 $ 125.00 $ 6 $ 130.00 $ 4 $ 135.00 $ 480.00 1,875.00 780.00 540.00 01-Nov 10 $140.00 $ 1,400.00 4 $ 120.00 $ 15 $ 125.00 $ 6 $ 130.00 $ 4 $135.00 $ 10 $140.00 $ 480.00 1,875.00 780.00 540.00 1,400.00 Nov-30 10 $ 140.00 3 $ 135.00 $ $ 1,400 405 4 $ 120.00 $ 15 $ 125.00 $ 6 $ 130.00 $ 1 $ 135.00 $ 480.00 1,875.00 780.00 135.00 $ 5,400.00

Periodic Method Requirement 2 - Option [C] is correct LIFO Method: Activity Jan purchase Feb purchase May purchase purchase purchase Purchases Less : Sales Ending Inventory 67 41 26 No of units Unit cost Total Cost 10 $120.00 $ 1,200.00 20 $125.00 $ 2,500.00 15 $130.00 $ 1,950.00 12 $135.00 $ 1,620.00 10 $140.00 $ 1,400.00 Sep Nov Cost of goods available for sale $ 8,670.00 Less : Ending Inventory 26 units : 10 units @ 120 16 units @ 125 $ $ 1,200 2,000 Cost of Ending Inventory $ 3,200 Cost of goods sold = Cost of goods available for sale - ending inventory $ 5,470 Note : LIFO Method assumes that goods which are purchased last will be sold first SO. Ending inventory consists of units which are purchased first

Periodic Method Requirement 5 - Option [C] is correct LIFO Method: Activity Jan purchase Feb purchase May purchase purchase purchase Purchases Less : Sales Ending Inventory 67 41 26 No of units Unit cost Total Cost 10 $120.00 $ 1,200.00 20 $125.00 $ 2,500.00 15 $130.00 $ 1,950.00 12 $135.00 $ 1,620.00 10 $140.00 $ 1,400.00 Sep Nov Cost of goods available for sale $ 8,670.00 Less : Ending Inventory 26 units : 10 units @ 120 16 units @ 125 $ $ 1,200 2,000 Cost of Ending Inventory $ 3,200 Cost of goods sold = Cost of goods available for sale - ending inventory $ 5,470 Note : LIFO Method assumes that goods which are purchased last will be sold first SO. Ending inventory consists of units which are purchased first

Requirement 3 - Option (D) is Correct FIFO Method Perpetual inventory Record Date Purchases Cost of goods sold Quantity unit cost Total cost Quantity unit cost Total cost Jan-01 10 $120.00 $ 1,200.00 Inventory Quantity unit cost total cost 10 $ 120.00 $ 1,200.00 Jan-31 6 $120.00 $ 720.00 4 $ 120.00 $ 480.00 Feb-01 20 $125.00 $ 2,500.00 4 $ 120.00 $ 20 $ 125.00 $ 480.00 2,500.00 Feb-28 4 $ 120.00 1 $ 125.00 $ $ 480.00 125.00 19 $125.00 $ 2,375.00 1 1 01-May 15 $130.00 $ 1,950.00 19 $ 125.00 15 $ 130.00 $ $ 2,375.00 1,950.00 31 - May 9 $ 125.00 $ 1,125.00 10 $ 125.00 15 $ 130.00 $ $ 1,250.00 1,950.00 Sep-01 12 $135.00 $ 1,620.00 10 $ 125.00 15 $ 130.00 12 $ 135.00 $ $ $ 1,250.00 1,950.00 1,620.00 Sep-30 8 $ 125.00 $ 1,000.00 2 $ 125.00 15 $ 130.00 12 $ 135.00 $ $ $ 250.00 1,950.00 1,620.00 01-Nov 10 $140.00 $ 1,400.00 2 $ 125.00 $ 15 $ 130.00 $ 12 $ 135.00 $ 10 $ 140.00 $ 250.00 1,950.00 1,620.00 1,400.00 Nov-30 2 $ 125.00 11 $ 130.00 $ $ 250 1,430 4 $ 130.00 $ 12 $135.00 $ 10 $ 140.00 $ 520.00 1,620.00 1,400.00 41 $ 5,130.00

Answer 2

Ans: (D) $3540

Explanation:

Nov.	10 units * $140	$1400
Sep.	12 units * $135	$ 1620
May	(26- 10-12)= 4 units * $130	$520
Total	26 Unit	$3540

Answer 3

Cost of the ending inventory = (10*120)+(16*125)= $3200