Question

Swifty Distribution markets CDs of the performing artist Fishe. At the beginning of October, Swifty had in beginning inventory 3,900 of Fishe’s CDs with a unit cost of $7. During October, Swifty made the following purchases of Fishe’s CDs. Oct. 3 4,875 @ $8 Oct. 19 5,850 @ $10 Oct. 9 6,825 @ $9 Oct. 25 7,800 @ $11 During October, 21,255 units were sold. Swifty uses a periodic inventory system.

1. Determine the cost of goods available for sale. Cost of goods available for sale $ ________

2. Calculate weighted-average cost per unit. (Round answer to 2 decimal places, e.g. 2.25.) Weighted-average cost per unit $_________

3. Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Round answers to 0 decimal places, e.g. 1,250. Use weighted-average unit cost rounded to 2 decimal places for computations.) FIFO LIFO AVERAGE-COST The ending inventory $_____ $_____ $_____ The cost of goods sold $_____ $_____ $_____

4. Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement? (1) _______ produces the highest inventory amount, $_______. (2) ________ produces the highest cost of goods sold, $ _______.

Answer 1

Periodic : FIFO Goods Purchasd Cost of Goods Sold Inventory Balance cost of Goods # of Units Cost Per Cost of Cost Per Ending # of Units Cost Per Unit Available for sales sold Unit Goods Sold # of Units Unit Inventory Beginning inventory 3900 7 27300 3900 7 27300 0 7 0 Purchases Oct-03 4875 8 39000 4875 8 39000 0 8 0 Oct-09 6825 9 61425 6825 9 61425 0 9 0 Oct-19 5850 10 58500 5655 10 56550 195 10 1950 Oct-25 7800 11 85800 0 11 0 7800 11 85800 Totals 29250 272025 21255 184275 7995 87750 27300 Periodic : LIFO Goods Purchasd Cost of Goods Sold Inventory Balance cost of Goods # of Units Cost Per Cost of Cost Per Ending # of Units Cost Per Unit Available for sales sold Unit Goods Sold # of Units Unit Inventory Beginning inventory 3900 7 27300 0 7 0 3900 7 Purchases Oct-03 4875 8 39000 780 8 62401 4095 8 32760 Oct-09 6825 9 61425 6825 9 61425 0 9 0 Oct-19 5850 10 58500 5850 10 58500 0 10 0 Oct-25 7800 11 85800 7800 11 85800 0 11 0 Totals 29250 272025 21255 211965 7995 60060

Periodic : Weighted Average Goods Purchasd Cost of Goods Sold Inventory Balance Cost Per Unit cost of Goods # of Units Cost Per Available for sales sold Unit Cost of Goods Sold # of Units Cost Per Ending Unit Inventory 7 27300 # of Units 0 Beginning inventory 3900 Purchases Oct-03 4875 Oct-09 6825 Oct-19 5850 7800 Totals 29250 8 9 10 39000 61425 58500 85800 272025 Oct-25 11 9.30 21255 9.30 197672 7995 9.30 74354 Answers The cost of Goods Available for sale Average Cost per unit =(272025/29250) FIFO LIFO Ending inventoy 87750 Cost of Goods Sold 184275 272025 9.30 Weighted Average 60060 74354 211965 197672 FIFO LIFO Result in Higest inventory amount Result in Highest Cost of goods sold Amount 87750 211965