8Allocating product cost between cost of goods sold and ending inventory LO 5-6
ID: 2418544 • Letter: 8
Question
8Allocating product cost between cost of goods sold and ending inventory LO 5-6
Adams Co. started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first purchase cost $950 and the other, $1,250. Adams sold one of the items during the year.
8 Based on this information, how much product cost would be allocated to cost of goods sold and ending inventory on the year-end financial statements, assuming use of following cost flow assumptions:
c. Weighted average?
FIFO LIFO Weighted Average
COST OF GOODS SOLD ( ) ( ) ( )
ENDING INVENTORY ( ) ( ) ( )
Adams Co. started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first purchase cost $950 and the other, $1,250. Adams sold one of the items during the year.
Explanation / Answer
Product Costs allocated to Cost of goods sold and ending inventory is as shown below:
a. FIFO
First in first out basis.
First purchase cost is $950 and second purchase cost is $1,250
Cost of goods sold is $950 and
Ending inventory is $1,250
b. LIFO
Last in first out basis.
First purchase cost is $950 and second purchase cost is $1,250
Cost of goods sold is $1,250 and
Ending inventory is $950
c. Weighted Average
Average of both purchases
Cost of goods sold is ($1,250+ $950)/2
= 1,100 and
Ending inventory is ($1,250 + $950) – Cost of goods sold ($1,100)
= $1,100
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.