Question

Ziad Company had a beginning inventory on January 1 of 285 units of Product 4-18-15 at a cost of $19 per unit. During the year, the following purchases were made.

Mar. 15

760 units

at

$22

Sept. 4

665 units

at

$25

July 20

475 units

at

$23

Dec. 2

190 units

at

$28

1,900 units were sold. Ziad Company uses a periodic inventory system.

A: Determine the cost of good available for sale

B: Calculate the average cost per unit

C: Determine the ending inventory, and the cost of goods sold under each of the assumed cost flow methods. (FIFO, LIFO, and average cost)\

D: Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?

Answer 1

A: Determine the cost of good available for sale

Beginning inventory	285	5415
Purchase mar 15	760	16720
Purchase july 20	475	10925
Purchase sept 4	665	16625
Purchase dec 2	190	5320
Total	2375	55005

2. Average cost per unit = 55005/2375 = 23.16 per unit

C: Determine the ending inventory, and the cost of goods sold under each of the assumed cost flow methods.

	FIFO	LIFO	Average cost
Ending inventory	190*28+285*25=12445	285*19+190*22=9595	475*23.16=11001
Cost of goods sold	42560	45410	44004

d) Highest inventory amount on balance sheet = FIFO method

e) Highest cost of goods sold for income statement = LIFO method