Win Surf Wear sells suits. On January 2, there were 21 suits in inventory at a t
ID: 2344412 • Letter: W
Question
Win Surf Wear sells suits. On January 2, there were 21 suits in inventory at a total cost of $4,809. At the end of the year, there were 17 suits in the ending inventory. Of these, 1 was purchased on July 27, 10 were purchased on Sep. 27, and 6 were purchased on Nov. 29.
Instructions: Assign a cost to the ending inventory using the following:
1. Specific identification method
2. FIFO method
3. LIFO method
4. Weighted average cost method Find out the cost of inventory sold.
Win Surf Wear sells suits. On January 2, there were 21 suits in inventory at a total cost of $4,809. At the end of the year, there were 17 suits in the ending inventory. Of these, 1 was purchased on July 27, 10 were purchased on Sep. 27, and 6 were purchased on Nov. 29. Instructions: Assign a cost to the ending inventory using the following: 1. Specific identification method 2. FIFO method 3. LIFO method 4. Weighted average cost method Find out the cost of inventory sold.Explanation / Answer
For #1. Specific Identification Method: You have 1 item remaining in ending inventory that was purchased on July 27 @ $240. You have all 10 remaining in ending inventory that were purchased on Sep 27 @ $241/ea. You have all 6 in ending inventory that were purchased on Nov. 29 @ $244/ea. So, adding the amounts of each suit, the cost of ending inventory would be $240+2,410+1,464 = $4,114 Cost of inventory sold is: $15,341 - 4,114 = $11227 For #2. FIFO method: With the first-in-first-out method, you figure the ending inventory similarly to #1. The first items in inventory are the first sold, meaning the last items in inventory are still in inventory. Starting from most recently bought to find the 17 still in inventory, we add all 6 from Nov. 29 ($1,464), plus all 10 from Sept. 27 ($2,410), plus 1 from the July 27 shipment ($240). So, ending inventory is $1,464 + 2,410 + 240 = $4,114 Cost of inventory sold is: $15,341 - 4,114 = $11227 For #3. LIFO method: With this method, you assume the last items received in inventory are the first ones out. So, starting from the oldest items in inventory, you find the cost of the remaining 17 in inventory. With the information given, 17 of the beginning inventory suits from Jan. 2 are left. They were $229/each. So, ending inventory is $229 x 17 = $3,893 Cost of inventory sold is: $15,341 - 3,893 = $11,448 For #4. Weighted Average Cost method: With this method, you simply find the average cost of all the suits and then multiply that cost by the number of suits left in inventory. You are given the total suits and total cost. $15,341 / 65 suits = $236.02 $236.02 x 17 (suits left in inventory) = $4,012.26 The cost of inventory sold is: $15,341 - $4,012.26 = $11,328.74
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