Question

Problem 6-3A

Sekhon Company had a beginning inventory on January 1 of 189 units of Product 4-18-15 at a cost of $21 per unit. During the year, the following purchases were made.

Mar. 15

472 units

at

$22

Sept. 4

389 units

at

$24

July 20

295 units

at

$23

Dec. 2

118 units

at

$25

1,180 units were sold. Sekhon Company uses a periodic inventory system.

Determine the cost of goods available for sale.

The cost of goods available for sale

$

Calculate average cost per unit. (Round answer to 3 decimal places, e.g. 1.250.)

Average cost per unit

$

Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. 1,250.)

		FIFO		LIFO		AVERAGE-COST
The ending inventory		$		$		$
The cost of goods sold		$		$		$

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?

(1)		results in the highest inventory amount, $ .
(2)		produces the highest cost of goods sold, $ .

Answer 1

	Units	Unit cost	Total
Jan. 1	189	21	3969
Mar. 15	472	22	10384
July 20	295	23	6785
Sept. 4	389	24	9336
Dec. 2	118	25	2950
Total	1463		33424
1
The cost of goods available for sale	33424
2
Average cost per unit	22.846	=33424/1463

3
Ending inventory units	283	=1463-1180
FIFO:
The ending inventory	6910	=(118*25)+(283-118)*24
The cost of goods sold	26514	=33424-6910
LIFO:
The ending inventory	6037	=(189*21)+(283-189)*22
The cost of goods sold	27387	=33424-6037
Average cost:
The ending inventory	6465	=283*22.846
The cost of goods sold	26959 or 26958	=33424-6465
(1) FIFO results in the highest inventory amount, $ 6910
(2) LIFO produces the highest cost of goods sold, $ 27387