Accounting- Inventory Cost using the Periodic Inventory System

Question

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

Jan. 1     Inventory 200 units at $60
Feb. 17   Purchase 275 units at $64
July 21   Purchase 300 units at $68
Nov. 23  Purchase 225 units at $70

 

There are 220 units of the item in the physical inventory at December 31. The periodic inventory system is used.

a. Determine the inventory cost by the first-in, first-out method.


b. Determine the inventory cost by the last-in, first-out method.


c. Determine the inventory cost by the weighted average cost method.

Answer 1

What is your question? With what are you having a problem? What do you not understand? It is not appropriate just to assign a problem for someone else to solve. You should explain what help you need and do as much of the work as possible.

 

With a periodic inventory system, you make the calculation of cost of goods sold based on the physical count of ending inventory. You had 1,000 units available for sale, you have 220 units left, so you sold 780 units. Now you have to decide how much the sold units cost.

 

The total cost of all 1,000 units is $65,750. How did I get this number?

 

FIFO - The ending inventory consists of the units bought most recently

220 * 70 = $15,400

 

Goods available for sale  . . 65,750

Less ending inventory  . . .15,400

Cost of goods sold . . . . .50,350

 

LIFO - the ending inventory consists of the earliest purchases.

200 units * 60 = 12,000

20 units * 64 = 1,280

Total cost  = 13,280

 

Goods available for sale . . 65,750
Less ending inventory . . .
Cost of goods sold . .

 

What is the average cost of the inventory? How did I get $65.75

Ending inventory average cost = 220 * 65.75 = ?

 

 

Goods available for sale  . . .$65,750

Less ending inventory . . .
Cost of goods sold .