Calculating Cost of Goods Sold and Ending Inventory under Periodic FIFO. LIFO, a

Question

Calculating Cost of Goods Sold and Ending Inventory under Periodic FIFO. LIFO, and Weighted Average In its first month of operations, Literacy for the Illiterate opened a new bookstore and bought merchandise in the following order. 300 units at $7 on January 1, 450 units at $8 on January 8, and 750 units at $9 on January 29. Assuming 900 units are on hand at the end of the month, calculate the cost of goods sold and ending inventory on January 31 under the FIFO, LIFO, and weighted average cost flow assumptions. Assume a periodic inventory system is used.

Explanation / Answer

Cost of goods sold and Ending inventory is calculated as shown below:

FIFO Purchased Units Cost Sold Units Cost of goods sold Inventory Cost of Inventory Opening 0 0 0 0 0 Purchase on jan-1 300 $7 300 2100 0 0 Purchase on Jan 8 450 8 300 2400 150 1200 Purchase on Jan 29 750 9 0 750 6750 Total 1500 24 600 4500 900 7950 LIFO Purchased Units Cost Sold Units Cost of goods sold Inventory Cost of Inventory Opening 0 0 0 0 0 Purchase on jan-1 300 $7 0 300 2100 Purchase on Jan 8 450 8 0 450 3600 Purchase on Jan 29 750 9 600 5400 150 1350 Total 1500 24 600 5400 900 7050 Schedule of Cost of merchandise sold Weighted Average Cost Flow method Purchases Cost of merchandise sold Inventory Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Jan-01 300 7 2100 300 7 2100 Jan-08 450 8 3600 750 7.6 5700 Jan-29 750 9 6750 1,500 8.3 12450 Jan-31 600 8.3 4980 900 8.3 7470

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