1 answer

Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale...

Question:

Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale during the year were as follows:

Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale during the year were as follows: Jan. 1 Inventory 30 units @ $106 per unit Mar. 10 Purchase 70 units @ $118 per unit Aug. 30 Purchase 10 units @ $124 per unit Dec. 12 Purchase 90 units @ $130 per unit There are 60 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by three methods, presenting your answers in the form below. Round the average cost per unit to the nearest cent and round your final answers to the nearest whole dollar. Hide Schedule of Cost of Merchandise Inventory and Cost of Merchandise Sold Inventory Method Merchandise Inventory Merchandise Sold a. FIFO b. LIFO c. Average cost

Answers

Ans.
Schedule of Cost of Merchandise Inventory and Cost of Merchandise Sold
Inventory Method Merchandise Inventory Merchandise Sold
FIFO $7,800 $16,580
LIFO $6,720 $17,660
Average Cost $7,314 $17,066
*WORKING   NOTES:
Ending inventory units = 60
Units sold = Total units available - Ending inventory units
(30 + 70 + 10 + 90) - 60
200 - 60   =   140 units
FIFO: Cost of goods available for sale Cost of goods sold - Periodic FIFO Ending inventory - Periodic FIFO
Units Rate Total Units Rate Total Units Rate Total
Beginning inventory 30 $106 $3,180 30 $106 $3,180 0 $106 $0
Purchases:
10-Mar 70 $118 $8,260 70 $118 $8,260 0 $118 $0
30-Aug 10 $124 $1,240 10 $124 $1,240 0 $124 $0
12-Dec 90 $130 $11,700 30 $130 $3,900 60 $130 $7,800
Total 200 $24,380 140 $16,580 0 $7,800
*In FIFO method the units that have purchased first, are released the first one and the ending inventory
units remain from the last purchases.
LIFO: Cost of goods available for sale Cost of goods sold - Periodic LIFO Ending inventory - Periodic LIFO
Units Rate Total Units Rate Total Units Rate Total
Beginning inventory 30 $106 $3,180 0 $50.00 $0 30 $106 $3,180
Purchases:
10-Mar 70 $118 $8,260 40 $118 $4,720 30 $118 $3,540
30-Aug 10 $124 $1,240 10 $124 $1,240 0 $124 $0
12-Dec 90 $130 $11,700 90 $130 $11,700 0 $130 $0
Total 200 $24,380 140 $17,660 60 $6,720
*In LIFO method the units that have purchased last, are released the first one and ending inventory units
remain from the first purchase.
Average cost: Cost of goods available for sale Cost of goods sold - Periodic Average cost Ending inventory - Periodic Average cost
Units Rate Total Units Rate Total Units Rate Total
Beginning inventory 30 $106 $3,180
Purchases:
10-Mar 70 $118 $8,260
30-Aug 10 $124 $1,240
12-Dec 90 $130 $11,700
Total 200 $24,380 140 $121.90 $17,066 60 $121.90 $7,314
Average cost per unit =   Total cost of goods available for sale / Units available for sale
$24,380 / 200
$121.90 per unit
.

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