Question

2. The Wacky Widget Company uses a periodic inventory approach. The units of items available for sale during the year are as follows:

January 1: Beginning Inventory                             90units@$54 each

March 10: Purchase                                                  112units@$55 each

August 30: Purchase                                                 100units@$58each

December 12: Purchase                                             98units@$60each

There are 104 units of the item in the physical inventory on December 31. Determine the cost of the ending inventory and the cost of merchandise sold under the FIFO, LIFO and Weighted Average Cost methods.

Answer 1

Total purchases = (112 x 55) + (100 x 58) + (98 x 60) = $17840

Opening stock = 90 x 54 = $4860

Units sold = (90 + 112 + 100 + 98) - 104 = 296 units

Closing inventory = 104 units

1. FIFO

Closing inventory = (98 units of Dec 12) + (6 units of Aug 30)

= (98 x 60) + (6 x 58)

= 6228

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

= 4860 + 17840 - 6228

= $16,472

2. LIFO

Closing inventory = (90 units of beginning inventory) + (14 units of Mar 10)

= (90 x 54) + (14 x 55)

= 5630

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

= 4860 + 17840 - 5630

= $17,070

3. Weighted average

Cost per unit = (Opening stock + Purchases)/ No. of units

= (4860 + 17840)/ (90 +112 + 100 +98)

= $56.75 per unit

Closing inventory = 104 x 56.75

= $5,902

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

= 4860 + 17840 - 5902

= 16798