Question

EXTRA CREDIT CHAPTER 5 & 6 During 2015, a company sells 220 units of inventory. The company has the following inventory purchase transactions for 2018 (6 points) Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 115 $60 $6900 Sep. 8 Purchase 210 6 2 13020 Nov 18 Purchase 85 75 6 375 $26.295 4101 Calculate cost of goods sold and ending inventory for 2015 Specific ID Sold all of beginning inventory, 25 from Nov 18 purchase, and the rest out of Sep 8 purchase. FIFO LIFO AVERAGE COST

Answer 1

Ans 1: Specific Identification: This method refers the tracking and costing of inventory based on the movement of specific, identifiable inventory items in and out of stock. Cost of Goods Available for Sale Cost of Good Sold Ending inventory Specific ID No of Cost Per Total No of Unit Cost Per Cost Per Total No of Unit Total Unit Unit Unit Unit Jan 1, Beginning 115 $60 $6,900 115 $60 $6,900 0 1 $60 $0 Purchases : March'21 210 $62 $13,020 $62 $1,550 185 $62 $11,470 August' 1 $75 $6,375 80 $75 $6,000 $75 $375 Total 410 $26,295 220 $14,450 190 $11,845 Ending Inventory $11,845 Cost of Good Sold $14,450 85 Ans 2: Periodic inventory System: In this system, the cost of sales and inventory are determined as the end of the accounting period. First in, first out method (FIFO): In this method it is assumed that inventory which is purchased first will be sold first and the inventory will consist of recent purchases. Cost of Goods Available for Sale Cost of Good Sold Ending inventory FIFO No of Cost Per Cost Per No of Unit Total No of Unit Cost Per Total Unit Unit Unit Unit Jan 1, Beginning 115 $60 $6,900 115 $60 $6,900 0 $60 SO Purchases : March'21 210 $62 $13,020 105) $62 $6,510 105 $62 $6,510 August' 1 $6,375 $75 SO $75 $6,375 Total $26,295 220 $13,410 190 $12,885 Ending Inventory $12,885 Cost of Good Sold $13,410 $75 85 410

Ans 3: Last in, first out method (LIFO): In this method it is assumed that inventory which is purchased last will be sold first and the inventory will consist of old purchases. Periodic inventory System: In this system, the cost of sales and inventory are determined as the end of the accounting period. Cost of Goods Available for Sale | Cost of Good Sold Ending inventory LIFO No of Cost Per Total No of Unit Cost Per Cost Per Total No of Unit Total Unit Unit Unit Unit Beginning 115 $60.00 $6,900 0 $60.00 $0 115 $60.00 $6,900 Purchases : March 21 210 $62.00 $13,020 1351 $62.00 $8,370 $62.00 $4,650 August' 1 85 $75.00 $6,375 85 $75.00 $6,375 0 $75.00 $0 Total 410 $26,295 220 $14,745 1901 $11,550 Ending Inventory $11,550 Cost of Good Sold $14,745 Total No of Unit Cost Per Ans 4: In average cost method per unit purchase is derived by adding cost opening inventory and purchase made during the year and then dividing it by the adding the units of opeinng inventory and units purchased during the year Cost of Goods Available for Sale Cost of Good Sold Ending inventory Average Cost No of Cost Per Total No of Unit Total Cost Per No of Unit Total Unit Unit Unit Unit Beginning 115 $60.00 $6,900 Purchases: March'21 $62.00 $13,020 August' 1 $75.00 $6,375 Total 410 $64.13 $26,295 220 $64.13 $14,110 190 $64.13 $12,185 Average Cost ($26295/410) $64.13 Ending Inventory $12,185 Cost of Good Sold $14,110 210