Financial Accounting

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Periodic inventory using FIFO, LIFO, and weighted average cost methods

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

DateLine Item DescriptionUnitsCost per UnitAmount
Jan. 1	Inventory	18 units	at $50	$900
Aug. 13	Purchase	4 units	at $52	208
Nov. 30	Purchase	6 units	at $54	324
	Available for sale	28 units		$1,432

There are 14 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using the (a) first-in, first-out (FIFO) method; (b) last-in, first-out (LIFO) method; and (c) weighted average cost method (round per-unit cost to two decimal places and your final answer to the nearest whole dollar).

Line Item DescriptionAmount
a. First-in, first-out (FIFO) method	$fill in the blank 1
b. Last-in, first-out (LIFO) method	$fill in the blank 2
c. Weighted average cost method

Answer 1

Let’s walk through each inventory valuation method step by step using the periodic inventory system. We’ll determine the ending inventory value based on the 14 units remaining on Dec. 31.

Inventory Details

Date Units Cost/Unit Total Cost
Jan 1	18	$50	$900
Aug 13	4	$52	$208
Nov 30	6	$54	$324
Total	28	$1,432
Ending Inventory	14 units

a. FIFO (First-In, First-Out)

FIFO means the oldest inventory is sold first, so ending inventory comes from the most recent purchases.

We need the 14 newest units:

1. 6 units @ $54 = $324
2. 4 units @ $52 = $208
3. 4 units @ $50 = $200 (from the Jan 1 batch)

FIFO Ending Inventory = 324 + 208 + 200 = $732

b. LIFO (Last-In, First-Out)

LIFO means the most recent inventory is sold first, so ending inventory comes from the oldest costs.

We need the 14 oldest units:

1. 14 units @ $50 = $700

LIFO Ending Inventory = $700

c. Weighted Average Cost

First, calculate the average cost per unit:

Average cost=TotalCostTotalUnits=1,43228≈51.14\text{Average cost} = \frac{Total Cost}{Total Units} = \frac{1,432}{28} \approx 51.14Then multiply by 14 units:

14×51.14=716.0014 \times 51.14 = 716.00Weighted Average Ending Inventory ≈ $716

Final Answers:

Method Ending Inventory
a. FIFO	$732
b. LIFO	$700
c. Weighted Avg	$716