Exercise 3 - Calculating inventory and cost of goods sold: Roni Inc. sells mugs

Question

Exercise 3 - Calculating inventory and cost of goods sold: Roni Inc. sells mugs and uses the periodic inventory system. The company has provided the following information about one of its items: Date 01/01/2017 07/22/2017 10/03/2017 11/07/2017 12/22/2017 Transaction Beginning inventor Purchase Purchase Purchase Purchase Number of units 150 160 100 80 130 Cost per unit S10 $14 S15 S17 S18 During the year, Roni Inc. sold 330 mugs. Required: 1. 2. 3. Calculate Roni Inc.'s inventory and cost of goods sold under FIFO. Calculate Roni Inc.'s inventory and cost of goods sold under LIFO Calculate Roni Inc.'s inventory and cost of goods sold under average cost.

Explanation / Answer

a) FIFO Units available for sale= 150+160+100+80+130= 620 Units sold=330 Ending inventory= 620-330= 290 Cost of goods sold Units Unit cost Total Sale from beginning inventory 01/01/2017 150 10 1500 Sale from purchase 07/22/2017 160 14 2240 Sale from purchase 10/03/2017 20 15 300 330 4040 Ending inventory Units Unit cost Total Inventory from purchase10/03/2017 80 15 1200 Inventory from purchase 11/07/2017 80 17 1360 Inventory from purchase 12/22/2017 130 18 2340 290 4900 Ending inventory is $4900 Cost of goods sold= $4040 b) LIFO Units available for sale= 150+160+100+80+130= 620 Units sold=330 Ending inventory= 620-330= 290 Cost of goods sold Units Unit cost Total Sale from purchase 12/22/2017 130 18 2340 Sale from purchase 11/07/2017 80 17 1360 Sale from purchase 10/03/2017 100 15 1500 Sale from purchase 07/22/2017 20 14 280 330 5480 Ending inventory Units Unit cost Total Inventory from beginning inventory 01/01/2017 150 10 1500 Inventory from purchase 07/22/2017 140 14 1960 290 3460 Ending inventory is $3460 Cost of goods sold= $5480 c) Average cost: Unit cost= Total cost/ total number of units available for sale                  = (150*10+160*14+100*15+80*17+130*18)/620= 8940/620= 14.419 Units available for sale= 150+160+100+80+130= 620 Units sold=330 Ending inventory= 620-330= 290 Cost of goods sold= 330*14.419= $4758.30 Ending inventory= 290*14.419= $4181.70

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