Two Wheels operates on a fiscal year beginning January 1. At the beginning of th

Question

Two Wheels operates on a fiscal year beginning January 1. At the beginning of the year, the shop had 6 bicycles @$394 each (opening inventory). During the year the business made the following purchases:

Date Bicycle Cost
Jan.20 4 $399
Mar. 5 5 $415
Apr. 23 7 $419
Aug. 14 4 $423
Oct. 3 6 $430
Nov. 17 3 $435

There were seven bicycles in inventory at the end of the period. During the year, the bicycles were sold for $675 each.

Instructions:

Calculate the cost of the ending inventory using the FIFO, LIFO, and weighted average cost methods.
Prepare a partial income statement for each inventory costing method showing the sales and the calculation of gross profit on sales.
Assume that the sales and purchases are net amounts.

Explanation / Answer

Cost of ending inventory using FIFO = 3*345 + 4*430 = 2755 answer Cost of ending inventory using LIFO = 6*394 + 1*399 = 2763 answer Cost of ending inventory using weighted average cost method = 6*322 + 1*258 = 2190 answer Happy to help

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