Name Section Hogwallop Company uses the periodic inventory method and had the fo
ID: 2340497 • Letter: N
Question
Name Section Hogwallop Company uses the periodic inventory method and had the following inventory information available: Units Unit Cost otal Cost 1/1 Beginning Inventory 100 $4 400 1/20 Purchase 400 $6 2,400 7125 Purchase 200$7 1,400 10/20 Purchase 30 $8 2.400 1.000 $6.600 A physical count of inventory on December 31 revealed that there were 400 units on hand. Instructions Answer the following independent questions and show computations supporting your answers. 1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is 2. Assume that the company uses the Average-Cost method. The value of the ending inventory on December 31is$ 3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 isExplanation / Answer
1.
Under the FIFO method of inventory valuation, Cost of goods sold consists of the units from beginning inventory and the earliest purchases. Ending inventory consists of the units from the recent purchases.
Under the FIFO method, ending inventory of 400 units will be 300 units from 10/20 purchases and 200 units from 7/25 purchases
The value of ending inventory at December 31 = (300 units * $8 per unit) + (100 units * $7 per unit)
= $2,400 + $700
= $3,100
2.
Cost of units available for sale = $6,600
Number of units available for sale = 1,000
Average unit cost = Cost of units available for sale / Number of units available for sale
= $6,600 / 1,000
= 6.6
The value of ending inventory on December 31 = 400 units * $6.6 per unit
= $2,640
3.
Under the LIFO method of inventory valuation, Cost of goods sold consists of the units from recent purchases. Ending inventory consists of the units from beginning ineventory and the earliest purchases.
Under the LIFO method, ending inventory of 400 units will be 100 units from beginning inventory and 300 units from 1/20 purchases
The value of ending inventory at December 31 = (100 units * $4 per unit) + (300 units * $6 per unit)
= $400 + $1,800
= $2,200
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