Question

Periodic Inventory by Three Methods; Cost of Merchandise Sold

The units of an item available for sale during the year were as follows:

Jan. 1	Inventory	40 units @ $106
Mar. 10	Purchase	70 units @ $114
Aug. 30	Purchase	30 units @ $118
Dec. 12	Purchase	60 units @ $122

There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

Cost of Merchandise Inventory and Cost of Merchandise Sold
Inventory Method	Merchandise Inventory	Merchandise Sold
First-in, first-out (FIFO)	$	$
Last-in, first-out (LIFO)
Weighted average cost

Answer 1

Units sold = (40 + 70 + 30 + 60) - 80 = 120

Purchases ($) = (70 x 114) + (30 x 118) + (60 x 122) = $18,840

1. FIFO Periodic

Closing stock = (60 units of Dec 12) + (20 units of Aug 30)

= (60 x 122) + (20 x 118)

= $9,680

Cost of goods sold = Opening stock + purchase - Closing stock

= 4240 + 18840 - 9680

= $13,400

2. LIFO Periodic

Closing stock = (40 units of Jan 1) + (40 units of Mar 10)

= (40 x 106) + (40 x 114)

= $8,800

Cost of goods sold = Opening stock + purchase - Closing stock

= 4240 + 18840 - 8800

= $14,280

3. Weighted average

Per unit cost = (Opening stock + Purchases)/ No. of units

= (4240 + 18840)/ 200

= $115.40

Closing stock = 80 untis x 115.40

= $9,232

Cost of goods sold = Opening stock + purchase - Closing stock

= 4240 + 18840 - 9232

= $13,848