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Periodic inventory by three methods; cost of goods sold The units of an item available for...

Periodic inventory by three methods; cost of goods sold

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

Jan. 1 Inventory 30 units at $118
Mar. 10 Purchase 60 units at $128
Aug. 30 Purchase 30 units at $136
Dec. 12 Purchase 80 units at $142

There are 60 units of the item in the physical inventory at December 31. The periodic inventory system is used.

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

Cost of Ending Inventory and Cost of Goods Sold
Inventory Method Ending Inventory Cost of Goods Sold
First-in, first-out (FIFO) $fill in the blank 1 $fill in the blank 2
Last-in, first-out (LIFO) fill in the blank 3 fill in the blank 4
Weighted average cost fill in the blank 5 fill in the blank 6

Homework Answers

Answer #1

Cost of units available for sale = Beginning inventory + Purchases

= (30 units * $118) + (60 units * $128) + (30 units * $136) + (80 units * $142)

= $3,540 + $7,680 + $4,080 + $11,360

= $26,660

Number of units available for sale = Beginning inventory + Purchases

= 30 + 60 + 30 + 80

= 200

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Under the First in first out (FIFO) method of inventory valuation, Cost of goods sold consists of the units from beginning inventory and earliest purchases. Ending inventory consists of the units from recent purchases.

60 units in ending inventory consists of December 12 purchases.

Ending inventory = 60 units * $142

= $8,520

Cost of goods sold = Cost of units available for sale - Ending inventory

= $26,660 - $8,520

= $18,140

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Under the Last in first out (LIFO) method of inventory valuation, Cost of goods sold consists of the units from recent purchases. Ending inventory consists of the units from beginning inventory and earliest purchases.

60 units in ending inventory consists of 30 units from beginning inventory and 30 units from March 10 purchases.

Ending inventory = (30 units * $118) + (30 units * $128)

= $3,540 + $3,840

= $7,380

Cost of goods sold = Cost of units available for sale - Ending inventory

= $26,660 - $7,380

= $19,280

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Under the Weighted average method of inventory valuation both Cost of goods sold and Ending inventory are valued at average unit cost.

Weighted average cost per unit = Cost of units available for sale / Number of units available for sale

= $26,660 / 200

= $133.3

Ending inventory = 60 units * $133.3

= $7,998

Cost of goods sold = Cost of units available for sale - Ending inventory

= $26,660 - $7,998

= $18,662

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Inventory method Ending inventory Cost of goods sold
First-in, first-out (FIFO) $8,520 $18,140
Last-in, first-out (LIFO) $7,380 $19,280
Weighted average cost $7,998 $18,662
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