Altira corporation uses a perpetual inventory system. The following transactions

Question

Altira corporation uses a perpetual inventory system. The following transactions affected its merchandise inventory during the month of august 2016 Aug 1 inventory on hand-2,000 units cost 6.10 each 8 purchases 10,000 units for 5.50 each 14 sold 8,000 units for 12.00 each 18 purchased 6,000 units for 5.00 each 25 sold 7,000 units for 11.00 each 31 inventory on hand 3,000 units

Required

Determine the inventory balance altira would report in its august 31, 2016 balance sheet and the cost of goods sold it would report in its august 2016 income statement using each of the following cost flow methods.

1. First in first out (FIFO)

2. Last in first out (LIFO)

3. Average cost

Explanation / Answer

Cost of goods sold = 12,200+33,000+22,000+15,000 = 82,200

Ending Inventory = 3,000*5 = 15,000

Cost of goods sold = 44,000+30,000+5,500 = 79,500

Ending Inventory = (2,000*6.1)+(1,000*5.5) = 17,700

Average cost of goods per unit = 97,200/18,000 = 5.4

Cost of goods sold = (8,000+7,000)*5.4 = 81,000

Ending Inventory = 3,000*5.4 = 16,200

FIFO Method Units Rate Amount Inventory on hand 2000 6.1 12200 Aug 8th Purchases 10000 5.5 55000 Aug 14th Sales from beginning inventory -2000 6.1 -12200 Aug 14th Sales from aug 8th Purchase -6000 5.5 -33000 Aug 18th purchase 6000 5 30000 Aug 25th sales from aug 8th purchase -4000 5.5 -22000 Aug 25th sales from aug 18th purchase -3000 5 -15000

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