Perpetual Inventory System and Inventory Costing Methods The inventory of Wood4F

Question

Perpetual Inventory System and Inventory Costing Methods

The inventory of Wood4Fun and data on purchases and sales for a two-month period follow. The company closes its books at the end of each month. It uses the perpetual inventory system.

In preparing the solutions, it is helpful to determine the balance of inventory after each transaction, as shown in the Business Insight: Concepts and Applications feature in this chapter.

Determine the cost of ending inventory and cost of goods sold for April and May using the average-cost method. Round unit costs to two decimal places and round the final answers to the nearest dollar. Enter all amounts as positive numbers.

1. Cost Of Ending Inventory for May? Cost of Goods Sold in May?

2. Determine Cost of Ending Inventory for April and May using the FIFO Method

3. Determine Cost of Ending Inventory for April and May using the LIFO Method

Apr. 1 Beginning inventory   50 units @ $204 10 Purchase 100 units @ $220 17 Sale   90 units 30 Ending inventory   60 units May 2 Purchase 100 units @ $216 14 Purchase   50 units @ $224 22 Purchase   60 units @ $234 30 Sale 200 units 31 Ending inventory   70 units

Explanation / Answer

1. Average Cost Method:

Cost of ending inventory for may = $15483

Cost of Goods Sold for may = Opening Stock + Purchases - Closing Stock

= 12880 + 46840 - 15483

= $44237

2. FIFO Method

Cost of Ending Inventory for april = $13200

Cost of ending inventory for may = 2240 + 14040 = $16280

2. LIFO method:

Cost of Ending Inventory for april = $10200

Cost of ending inventory for may = $6120

Opening Units Rate Amount Purchase Units Rate Amount Sales units Rate Amount Closing Units Rate Amount Apr.1 50 204 10200 50 204 10200 Apr.10 100 220 22000 150 214.67 32200 Apr. 17 90 214.67 19320 60 214.67 12880 Apr. 30 60 214.67 12880 May 2 100 216 21600 160 215.5 34480 May 14 50 224 11200 210 217.52 45680 May 22 60 234 14040 270 221.19 59720 May 30 200 221.19 44238 70 221.19 15483 May 31 70 221.19 15483

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