Exercise 1 – FIFO Perpetual Lighting Designs by Laura has the following list of
ID: 2472006 • Letter: E
Question
Exercise 1 – FIFO Perpetual
Lighting Designs by Laura has the following list of beginning inventory, purchases, and sales for the month of June:
1st Beginning Inventory 600 light bulbs at $0.20
4th Purchase 400 light bulbs at $0.30
10th Sale 750 light bulbs at $1.75
13th Purchase 300 light bulbs at $0.25
19th Sale 370 light bulbs at $2.00
23rd Purchase 300 light bulbs at $0.35
28th Sale 160 light bulbs at $1.80
Determine the cost of merchandise sold for each sale (10th, 19th, and 28th). Calculate the cost of ending inventory using the first-in, first-out method under a perpetual inventory system.
Exercise 2 – LIFO Perpetual
Lighting Designs by Laura has the following list of beginning inventory, purchases, and sales for the month of June:
1st Beginning Inventory 600 light bulbs at $0.20
4th Purchase 400 light bulbs at $0.30
10th Sale 750 light bulbs at $1.75
13th Purchase 300 light bulbs at $0.25
19th Sale 370 light bulbs at $2.00
23rd Purchase 300 light bulbs at $0.35
28th Sale 160 light bulbs at $1.80
Determine the cost of merchandise sold for each sale (10th, 19th, and 28th). Calculate the cost of ending inventory using the last-in, first-out method under a perpetual inventory system.
Exercise 3 – Periodic (FIFO, LIFO, Average)
Spring River sells bottled water using a periodic inventory system. The following is a list of beginning inventory and purchases for bottles used in manufacturing their spring water.
Beginning Inventory 10,000 bottles at $0.10
First Purchase 5,500 bottles at $0.16
Second Purchase 6,000 bottles at $0.12
Third Purchase 4,000 bottles at $0.18
At the end of the year, 4,500 bottles remained in ending inventory. What is cost of merchandise sold and ending inventory under the FIFO, LIFO and average cost methods? Present your answers in the following form (in an excel spreadsheet). Round to the nearest dollar.
Cost
Inventory Method Merchandise Inventory Merchandise Sold
a. FIFO $ $
b. LIFO
c. Weighted average cost
Explanation / Answer
1 The calculation of cost of goods sold and cost of ending inventory using First in First Out under Perpetual method is as under: Date Particulars Inventory Rate Cost of purchase Cost of goods sold No. of shares in Inventory Inventory Cost 1st Beginning Inventory 600 $0.20 $120.00 $ - 600 $120.00 4th Purchase 400 $0.30 $120.00 1,000 $240.00 10th Sold -750 $165.00 250 $ 75.00 13th Purchase 300 0.25 $75.00 550 $150.00 19th Sale -370 $0.00 $105.00 180 $ 45.00 23rd Purchase 300 0.35 $105.00 480 $150.00 28th Sale -160 $40.00 320 $ 110.00 Cost of goods sold calculation: Date Particulars No. of shares Rate Amount 10th Sold 750 Cost of goods sold: 1st Beginning Inventory 600 $ 0.20 $120 4th Purchased 150 $ 0.30 $ 45 Cost of goods sold on 10th $165 Date Particulars No. of shares Rate Amount 19th Sold 370 Cost of goods sold: 4th Purchased (400-150) 250 $0.30 $75 13th Purchased (370-250) 120 $ 0.25 $30 Cost of goods sold on 19th $ 105 Date Particulars No. of shares Rate Amount 28th Sold 160 Cost of goods sold: 13th Purchased 160 $ 0.25 $ 40 Cost of goods sold on 28th $40 Cost of inventory at the end of the month is $110 for 320 units. 2 The calculation of cost of goods sold and cost of ending inventory using Last in First Out under Perpetual method is as under: Date Particulars Inventory Rate Cost of purchase Cost of goods sold No. of shares in Inventory Inventory Cost 1st Beginning Inventory 600 $0.20 $120.00 $ - 600 $120.00 4th Purchase 400 $0.30 $120.00 1,000 $240.00 10th Sold -750 $ 190.00 250 $50.00 13th Purchase 300 0.25 $75.00 550 $125.00 19th Sale -370 $89.00 $ 80.00 180 $ 45.00 23rd Purchase 300 0.35 $105.00 480 $150.00 28th Sale -160 $ 56.00 320 $ 94.00 Cost of goods sold calculation: Date Particulars No. of shares Rate Amount 10th Sold 750 Cost of goods sold: 4th Purchased 400 $ 0.30 $ 120 1st Beginning Inventory 350 $0.20 $ 70 Cost of goods sold on 10th $190 Date Particulars No. of shares Rate Amount 19th Sold 370 Cost of goods sold: 13th Purchased 300 $ 0.25 $75 1st Beginning Inventory 70 $ 0.20 $ 14 Cost of goods sold on 19th $89 Date Particulars No. of shares Rate Amount 28th Sold 160 Cost of goods sold: 23th Purchased 160 $0.35 $ 56 Cost of goods sold on 28th $ 56 Cost of Inventory as on at the end of the month: 1st Jan. Beginning Inventory 180 $ 0.20 $ 36.00 23rd Purchased 140 $ 0.35 $ 49.00 Cost of inventory: $ 85.00 3 Calculation of cost of goods sold and cost of inventory under FIFO Periodic method is as under: No. of bottles Rate Amount Beginning Inventory 10,000 $0.10 $ 1,000 Fist Purchase 5,500 $ 0.16 $ 880 Second Purchase 6,000 $0.12 $ 720 Third Purchase 4,000 $0.18 $ 720 Total 25,500 $ 3,320 Ending Inventory (4,500) $(780.00) Cost of goods sold 21,000 $ 2,540.00 Cost of ending inventory of 4,500 bottles is calculated as under: Cost of ending inventory would be out of last purchases: Third Purchase: 4000 bottles @ $0.18 $ 720.00 Second purchase: 500 bottles @ $0.12 $ 60 Total cost of ending inventory $780.00 Cost of goods sold would be the difference between total cost of purchase and the cost of ending inventory. Total Cost of purchase 25,500 $ 3,320.00 Less: Cost of ending inventory (4,500) $(780.00) Cost of goods sold 21,000 $ 2,540.00 Cost of goods sold and ending inventory using LIFO under Periodic method is calculated as under: No. of bottles Rate Amount Beginning Inventory 10,000 $ 0.10 $ 1,000 Fist Purchase 5,500 $0.16 $880 Second Purchase 6,000 $0.12 $720 Third Purchase 4,000 $ 0.18 $ 720 Total 25,500 $ 3,320 Ending Inventory (4,500) $(450.00) Cost of goods sold 21,000 $ 2,870.00 Cost of ending inventory of 4,500 bottles is calculated as under: Cost of ending inventory would be out of beginning inventory: Beginning inventory 4,500 bottles @ $0.10 $ 450.00 Total cost of ending inventory $450.00 Cost of goods sold would be the difference between total cost of purchase and the cost of ending inventory. Total Cost of purchase 25,500 $ 3,320.00 Less: Cost of ending inventory (4,500) $ (450.00) Cost of goods sold 21,000 $ 2,870.00 Cost of goods sold and ending inventory using Weighted average cost method under Periodic method is calculated as under: No. of bottles Rate Amount Beginning Inventory 10,000 $ 0.10 $1,000 Fist Purchase 5,500 $ 0.16 $ 880 Second Purchase 6,000 $ 0.12 $ 720 Third Purchase 4,000 $ 0.18 $ 720 Total 25,500 $ 3,320 Ending Inventory (4,500) $(450.00) Cost of goods sold 21,000 $ 2,870.00 Weighted average cost per unit=Total cost of purchase/Total number of units purchased '=$3,320/25,500 '=$0.13 Cost of ending inventory of 4,500 bottles is calculated as under: Cost of ending inventory would be out of beginning inventory: Ending inventory 4,500 bottles @ $0.13 $ 585.00 Total cost of ending inventory $ 585.00 Cost of goods sold would be the difference between total cost of purchase and the cost of ending inventory. Total Cost of purchase 25,500 $ 3,320.00 Less: Cost of ending inventory (4,500) $ (585.00) Cost of goods sold (21,000 bottles @ $0.13) 21,000 $ 2,735.00
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