Question

12.Suppose that David had the following transactions for his business inventory of widgets (purchase prices below).  

            Widget      Purchase Date     Direct Cost    Other Costs    Total Cost
      #1              August 15             $ 2,100            $ 100             $ 2,200
      #2              October 30            $ 2,200            $ 150             $ 2,350
      #3           November 10          $ 2,500            $ 100              $ 2,600

          In late December, David sold widget #2. What cost of goods sold would David record if he elects to use the LIFO method this year?

13.Suppose that David had the following transactions for his business inventory of widgets (purchase prices below).  

            Widget      Purchase Date     Direct Cost    Other Costs    Total Cost
      #1              August 15             $ 2,100            $ 100             $ 2,200
      #2              October 30            $ 2,200            $ 150             $ 2,350
      #3           November 10          $ 2,500            $ 100             $ 2,600

          In late December, David sold widget #2. What ending inventory would David record if he elects to use the FIFO method this year?  

Answer 1

Requirement 1(Question No.12 per screen above):-

Under the Last in first out method (LIFO) of inventory sales, the goods that are purchased recently will the goods that are sold . As such, for David, since the goods are sold in December, the cost of goods sold during December will the goods that were purchased on November 10.

Hence, the cost of goods sold = $2,600

Requirement 2(Question No.13 per screen above)

Under the First in First out method (FIFO) of inventory, the goods that are purchased first will be the goods that are sold . For David, the goods sold will hence be from the August 15th purchases.

The cost of goods in ending inventory will be the goods remaining with David after selling the goods bought on August 15th.

Ending inventory = $2,350 + $2,600

Ending inventory for David = $4,950

Please let me know if you have any questions via comments and all the best :)