Question

3) Pencil Company had the following information for the year: Units Cost per Unit Inventory, January 1 0 s2 Inventory Purchases March September November 9 $3 2 $3.50 Inventory, December 31 3 a) How many units did Pencil sell during the year? b) Calculate the dollar value of Pencil's December 31 inventory, as well as Pencil's COGS, using the FIFO method. c) Calculate the dollar value of Pencil's December 31 inventory, as well as Pencil's COGS, using the LIFO method. d) Calculate the dollar value of Pencil's December 31 inventory, as well as Pencil's COGS, using the average cost method.

Answer 1

Units sold during the year rightarrow Beginning inventory + Inventory purchased - closing inventory rightarrow 20 + 4 + 9 + 2 - 3 rightarrow 35 - 3 rightarrow 32 units (b) Dollar value of pencil's December 31 inventory's as well as pencil's COGS , using FIFO method \r\n It is assumed that inventory is sold on December 31 , as nothing is mentioned about date of sales in question units sold = 32 units (Refer solution a) cost of goods sold = (20 times 2) + (4 times 2 . 50) + (8 times 3) = $ 40 + $ 10 + $ 24 = $ 74 December 31 Inventory or Ending inventory = (1 times 3) + (2 times 3 - 50) rightarrow $ 3 + $ 7 rightarrow $ 10 FIFO Method rightarrow cost of goods sold = $ 74 rightarrow Ending inventory = $ 10 \r\n (c) Dollar value of pencil's December 31 , as well as pencil's COGS , using the LIFO Method In LIFO Method , the inventory purchased at last will be sold first In this part also , it is assumed that inventory is sold on December 31 , as nothing is mentioned about date of sale in the question