Question

Kirtland Corporation uses a periodic inventory system. At the end of the annual accounting period, December 31, the accounting records for the most popular item in inventory showed the following: Units 360 Unit Cost $5.00 Transactions Beginning inventory, January 1 Transactions during the year: a. Purchase, January 30 Purchase, May 1 Sale ($7 each) d. Sale ($7 each) 3.00 6.00 oooo 260 420 (120) (660)
Please give Step-By-Step on how you did the calculations and where the numbers came from.

Answer 1

Periodic Method Average Cost Method Units No of units Unit cost Total Cost Purchases Date Activity 1040 360 $ 5.00 1,800.00 01-Jan Beginning Inventory Less : Sales -780 260 $ 3.00 $ 30-Jan Purchase Ending Inventory 780.00 260 $ 2,520.00 420 $ 01-May Purchase 6.00 Cost of goods available for sale 5,100.00 Average Cost per Unit 5100/1040 units 4,90 Less Ending Inventory 260 units 260 Units @$ $4.90 1,274.00 Ending Inventory 1,274.00 Cost of Goods sold Cost of goods available for sale Ending Inventory 3,826.00 Note Avg cost method assumes that goods are sold at avg cost per unit Therefore, Ending inventory will also be valued at avg cost per unit Note: Round off was made upto 2 decimals and calculated ending inventory Cost of goods sold was not calculated using avg cost so it will became diff , if calculated using avg cost $4 may vary

Periodic Method FIFO Method: Units No of units Total Cost Purchases Date Activity 01-Jan Beginning Inventory Unit cost 1040 360 $ Less : Sales 5.00 1,800.00 -780 Ending Inventory 260 $ $ 30-Jan Purchase 3.00 780.00 260 420 $ 6.00 $ 01-May Purchase 2,520.00 5,100.00 Cost of goods available for sale Less Ending Inventory 260 units 260 Units $6 $ 1,560.00 Ending Inventory 1,560.00 Cost of Goods sold Cost of goods available for sale Ending Inventory 3,540.00 Note FIFO Method Assumes that Goods which are purchased first will be sold First, So in Ending inventory units will be there which are purchased last.

Periodic Method LIFO Method Units No of units Total Cost Date Activity 01-Jan Beginning Inventory Unit cost Purchases 1040 360 $ Less : Sales 5.00 1,800.00 -780 Ending Inventory 30-Jan Purchase 260 $ $ 3.00 780.00 260 420 $ 6.00 $ 01-May Purchase 2,520.00 Cost of goods available for sale 5,100.00 Less Ending Inventory 260 units 260 Units @$5 $ 1,300.00 $ 1,300.00 Ending Inventory Cost of Goods sold Cost of goods available for sale Ending Inventory 3,800.00 Note LIFO Method Assumes that Goods which are purchased last will be sold First, So in Ending inventory units will be there which are purchased first.

Periodic Method Specific Ident Method Units No of units Unit cost Total Cost Purchases Date Activity 01-Jan Beginning Inventory 1040 360 $ 5.00 1,800.00 Less : Sales -780 260 $ 3,00 $ 780.00 30-Jan Purchase Ending Inventory 260 $ 2,520.00 420 $ 01-May Purchase 6.00 Cost of goods available for sale 5,100.00 Average Cost per Unit 5100/1040 units 4.90 Less Cost of goods sold First sale of 120 units 120 2/5* $5:48 units @ $5 120 3/5 $3 72 units @ $3 $ $ 240.00 216.00 Second Sale of 660 units Remaining units of beginning inventory (360-48) units : 312 units@ $5 Remaining balance from may 1 348 units @$6 $ 1,560.00 $ 2,088.00 $4,104.00 $ Ending Inventory: Cost of goods available for sale-Cost of goods sold 996.00