Question

Exercise 2 – LIFO Perpetual

Lighting Designs by Laura has the following list of beginning inventory, purchases, and sales for the month of May:

1^st      Beginning Inventory                         500 light bulbs at $0.75

6^th      Purchase                                           300 light bulbs at $0.55

9^th      Sale                                                   650 light bulbs

12^th    Purchase                                           200 light bulbs at $0.60

16^th    Sale                                                   275 light bulbs

22^nd   Purchase                                            200 light bulbs at $0.65

30^th    Sale                                                   125 light bulbs

Calculate the cost of ending inventory using the last-in, first-out method under a perpetual inventory system.

Exercise 3 – Periodic (FIFO, LIFO, Average)

Spring River sells bottled water using a periodic inventory system. The following is a list of beginning inventory and purchases for bottles used in manufacturing their spring water.

                        Beginning Inventory                           6,000 bottles at $0.20

                        First Purchase                                      4,500 bottles at $0.22

                        Second Purchase                                 5,600 bottles at $0.24

                        Third Purchase                                    2,000 bottles at $0.26

At the end of the year, 2,500 bottles remained in ending inventory. What is cost of merchandise sold and ending inventory under the FIFO, LIFO and average cost methods? Present your answers in the following form (in an excel spreadsheet):

                                                                                                                                    Cost

Inventory Method                             Merchandise Inventory                    Merchandise Sold

a. FIFO                                                   $                                                          $

b. LIFO          

c. Weighted average cost

Answer 1

FIFO method states that good purchased first are sold first

LIFO method states that goods purchased later are sold first

Average cost method takes into account average cost for the purpose of calculation.

The records are updated after each transaction under perpetual method while they are updated at the end of the period under periodic method

Units in ending inventory = 500+300-650+200-275+200-125

= 150 units

Cost as per LIFO = 75*0.75+75*0.65

=$105

FIFO

Cost of ending inventory = 2000*0.26+500*0.24 =$640

Cost of goods sold = total cost goods available- ending inventory

= 4054-640

=$3,414

LIFO

Cost of ending inventory = 2500*0.2 =$500

Cost of goods sold =$3,554

Average cost per unit

Ending inventory =(4054/18100)*2500 =$559.94

Cost of goods sold =$3494.06