The units of an item available for sale during the year were as follows:
Jan. 1 Inventory 1,800 units at $108
Mar. 10 Purchase 2,240 units at $110
Aug. 30 Purchase 2,000 units at $116
Dec. 12 Purchase 1,960 units at $120
There are 2,000 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by three methods, presenting your answers in the following form:
Cost Inventory Method Merchandise Inventory Merchandise Sold a. First-in, first-out $ $ b. Last-in, first-out c. Weighted average cost
Answer:
Merchandise Merchandise Inventory Method Inventory Sold a. FIFO$239,840 $668,160 b. LIFO216,400 691,600 c. Weighted average cost 227,000 681,000 Cost of merchandise available for sale: 1,800 units at $108........................................................................... $194,400 2,240 units at $110........................................................................... 246,400 2,000 units at $116.......................................................................... 232,000 1,960 units at $120......................................................................... 235,200 8,000 units (at an average cost of $113.50)....................................... $908,000 a. First-in, first-out: Merchandise inventory: 1,960 units at $120.......................................................................... $235,200 40 units at $116........................................................................... 4,640 2,000 units...................................................................................... $239,840
Merchandise sold: $908,000 – $239,840......................................................................... $668,160 b. Last-in, first-out: Merchandise inventory: 1,800 units at $108........................................................................... $194,400 200 units at $110......................................................................... 22,000 2,000 units.................................................................................... $216,400
Merchandise sold: $908,000 – $216,400.......................................................................... $691,600 c. Weighted average cost:
Merchandise inventory: 2,000 units at $113.50 ($908,000 ÷ 8,000 units)....................................$227,000 Merchandise sold: $908,000 – $227,000....................................................................... $681,000