Question

The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations:

Jan. 20 Purchased 440 units @ $ 8 = $ 3,520

Apr. 21 Purchased 240 units @ $ 10 = 2,400

July 25 Purchased 320 units @ $ 13 = 4,160

Sept. 19 Purchased 130 units @ $ 15 = 1,950

During the year, The Shirt Shop sold 930 T-shirts for $24 each.

Required

a. Compute the amount of ending inventory The Shirt Shop would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average. (Round cost per unit to 2 decimal places and final answers to the nearest whole dollar amount.)

Answer 1

	Units	Unit cost	Total cost
Jan. 20	440	8	3520
Apr. 21	240	10	2400
July 25	320	13	4160
Sept. 19	130	15	1950
Total	1130		12030
Average cost = $10.65
Ending inventory units = 1130-930 = 200 units
a
(1) FIFO ending inventory	2860	=(130*15)+(70*13)
(2) LIFO ending inventory	1600	=200*8
(3) Weighted average ending inventory	2130	=200*10.65
Note:
For FIFO, ending inventory comprises of 130 units from Sept. 19 purchase and 70 units from July 25 purchase
For LIFO, ending inventory comprises of 200 units from Jan. 20 purchase