Question

The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 20 Purchased 480 units @ $ 9 = $ 4,320 Apr. 21 Purchased 280 units @ $ 11 = 3,080 July 25 Purchased 360 units @ $ 14 = 5,040 Sept. 19 Purchased 170 units @ $ 16 = 2,720 During the year, The Shirt Shop sold 1,050 T-shirts for $25 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

1)ending inventory under FIFO=cost of units available for sale-cost of goods sold=$15160-$11460=$3700.

calculation:-

cost of goods sold=4320+3080+290 unitsx14=$11460.

assumption:-under FIFO method,units sold wil contain items of old purchases in orderwise.

2)ending inventory under LIFO=cost of units available for sale-cost of goods sold=$15160-$13000=$2160.

calculation:-

cost of goods sold=2720+5040+3080+240*9=$13000.

assumption:-under LIFO method,units sold wil contain items of recent purchases in orderwise.

3)ending inventory under average cost method=cost of units available for sale-cost of goods sold=$15160-$12340=$2820.

calculation:-

cost of goods sold=units sold*average cost per unit=1050 unist x $15160/1290 units=$12340.

average cost per unit=15160/1290 units=$11.75