Determine cost of goods sold and ending inventory, using FIFO, LIFO, and average

Question

Determine cost of goods sold and ending inventory, using FIFO, LIFO, and average-cost with analysis. (LO 2) Sekhon Company had a beginning inventory on January 1 of 160 units of Product 4-18-15 at a cost of $20 per unit. During the year, the following purchases were made. 1,000 units were sold. Sekhon Company uses a periodic inventory system. Instructions (a) Determine the cost of goods available for sale. (b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and UFO methods. (c) Which cost How method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?

Explanation / Answer

a) quantity rate Cost 1-Jan opening inventory 160 20 3200 15-Mar Purchase 400 23 9200 20-Jul Purchase 250 24 6000 4-Sep Purchase 330 26 8580 2-Dec Purchase 100 29 2900 Total units avaiable for sale 1240 29880 Total cost of goods available for sale 29880 b) Total units avaiable for sale 1240 Total units sold 1000 closing inventory 240 Cost of goods sold - FIFO 1-Jan opening inventory 160 20 3200 15-Mar Purchase 400 23 9200 20-Jul Purchase 250 24 6000 4-Sep Purchase 190 26 4940 Total 1000 23340 Cost of ending inventory 4-Sep Purchase 140 26 3640 2-Dec Purchase 100 29 2900 Total 240 6540 Cost of goods sold - LIFO 2-Dec Purchase 100 29 2900 4-Sep Purchase 330 26 8580 20-Jul Purchase 250 24 6000 Total 1000 24840 Cost of ending inventory 15-Mar Purchase 80 23 1840 1-Jan opening inventory 160 20 3200 Total 240 5040 Cost of goods sold - Average cost Total units avaiable for sale 1240 Average cost ( 29880/1240) 24.10 Cost of goods sold ( 1000 * 24.10) 24100 Ending inventory ( 240 * 24.10) 5784 c) (1) The highest inventory amount for the balance sheet is on FIFO cost flow method (2) The highest cost of goods sold for the income statement is on LIFO cost flow statement

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