Question

# Gaga Fashions uses a periodic inventory system. The beginning inventory of a particular product, and the...

Gaga Fashions uses a periodic inventory system. The beginning inventory of a particular product, and the purchases during the current year, were as follows:

Jan 1 Beginning Inventory            400 \$7.00        2,800
Feb 15 Purchase         1,000 \$7.50        7,500
June 30 Purchase         1,400 \$8.00      11,200
Nov 25 purchase         1,200 \$8.25        9,900
Total Available for Sale in Year         4,000

31,400

At December 31, the ending inventory of this product consisted of 1,300 units.
Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation:

Average Cost

First In, First Out

 Last In, First Out

Closing Inventory = 1,300 Units

Average Cost Method:

Average Cost of Inventory = 31,400/4,000 = \$7.85 per unit

Cost of Ending Inventory = 1300*7.85 = \$10,205

Cost of Goods Sold = 2,700*7.85 = \$21,195

FIFO Method:

Ending Inventor = 1,300 units

Purchased on Nov 25 = 1,200*8.25 = \$9,900

Purchased on June 30 = 100*8 = \$800

Cost of Ending Inventory = \$10,700

Cost of Goods Sold = \$31,400-\$10,700 = \$20,700

LIFO Method:

Ending Inventor = 1,300 units

Opening Balance 400*7 = \$2800

Purchased on Feb 15 = 900*7.50 = \$6,750

Cost of Ending Inventory = \$9,550

Cost of Goods Sold = \$31,400-\$9,550 = \$21,850

Beginning inventory is first sold in FIFO while latest inventory is first sold in LIFO Method.

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