Question

AssumeFisher Tire, Inc., completed the following perpetual inventory transactions for a line of tires.

Beginning inventory. . . . . .	38	tires @	$130
Purchase. . . . . . . . . . . . . . .	16	tires @	$135
Sale. . . . . . . . . . . . . . . . . . .	43	tires @	$224

. Compute cost of goods sold and gross profit using FIFO, LIFO, and average cost methods. (Round the average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

	FIFO
Sales revenue
Cost of goods sold
Gross profit

Answer 1

S.No.	PARTICULARS	FIFO	LIFO	AVERAGE COST
I	Sales (43*224)	9632	9632	9632
II	cost of goods sold #	5615	5670	5654
III	gross profit (I-II)	4017	3962	3978

cost of goods sold ;

FIFO; In FIFO method the goods which are lying, in the beginning, are sold off first

• hence the opening inventory of 38 tires are sold off first and then the remaining 5 tires are sold from the batch of this year's purchases
• so, the total cost of goods sold will be 5615 (38*130 +5*135)

LIFO; In this method, the goods that are recently purchased are sold off first

• hence the recently purchased 16 tires are sold off first and the remaining sales of 27 tires are made from the old stock
• so, the total cost o goods sold will be 5670 (16*135 +27*130)

AVERAGE COST; In this method, an average cost is set up

average cost = total cost of goods in the company / total number of units

• the average cost of goods in the company = (38*130+16*135)/54 = 131.48
• hence the total cost of goods sold will be 43*131.48 =5654