Question

Express Distribution markets CDs of the performing artist Fishe. At the beginning of October, Express had in beginning inventory 4,200 of Fishe’s CDs with a unit cost of $7. During October, Express made the following purchases of Fishe’s CDs.

Oct. 3		5,250	@	$8		Oct. 19		6,300	@	$10
Oct. 9		7,350	@	$9		Oct. 25		8,400	@	$11

During October, 22,890 units were sold. Express uses a periodic inventory system.

Determine the Cost of goods available for sale:

Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. 1,250. Use weighted-average unit cost rounded to 2 decimal places for computations.)

Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?​

Answer 1

	Units	Unit cost	Total
Beginning inventory	4200	7	29400
Oct. 3	5250	8	42000
Oct. 9	7350	9	66150
Oct. 19	6300	10	63000
Oct. 25	8400	11	92400
Total	31500		292950
Average cost = 292950/31500 = $9.3
Ending inventory = 31500-22890= 8610
1
Cost of goods available for sale = $292950
2
FIFO:
The ending inventory	94500	=(8400*11)+(210*10)
The cost of goods sold	198450	=292950-94500
LIFO:
The ending inventory	64680	=(4200*7)+(4410*8)
The cost of goods sold	228270	=292950-64680
Average cost:
The ending inventory	80073	=8610*9.3
The cost of goods sold	212877	=292950-80073
3
FIFO method results in the highest inventory amount for the balance sheet
LIFO method results in the highest cost of goods sold for the income statement