Question

Shown below is the activity for one of the products of Wonderful Pets Creations: January 1 balance, 80 units @ $50 ($4,000) Requirements:

Purchases:

Janurary 18: 40 Units @ $51

Janurary 28: 40 Units @ $52

Sales:

Janurary 12: 30 Units

Janurary 22: 30 Units

Janurary 31: 45 Units

a) Compute the ending inventory and cost of goods sold assuming Wonderful Pet Creations uses FIFO. NOTE that FIFO Periodic and FIFO Perpetual methods give the same answer.

b) Compute the ending inventory and cost of goods sold assuming Wonderful Pet Creations uses LIFO and a periodic inventory system.

c) Compute the ending inventory and cost of goods sold assuming Wonderful Pet Creations uses average cost and a periodic inventory system.

Answer 1

Periodic innventory system

	Units	Rate	FIFO	LIFO	Average Cost
Begining Inventory Jan 1, 2017	80	50	4000	4000	4000
Add: Purchases
January 18 (40@ 51)	40	51	2040	2040	2040
July 31 (1200 units @ 40)	40	52	2080	2080	2080
Total Purchases	80		4120	4120	4120
Goods Available for sale	160		8120	8120	8120
Average rate per unit			50.75	50.75	50.75
Cost of Goods sold	105		5275	5370	5328.75
			(80*50)+ (25*51)	((40*52)+(40*51)+ (25*50))	(105*50.75)
Ending Inventory	55		2845	2750	2791.25