Penn Company uses a periodic inventory system. At the end of the annual accounti

Question

Penn Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 1 UnitsUnit Cost 2,000$5 nventory, December 31, prior year For the current year Purchase, March 21 Purchase, August 1 5,000 3,000 4,000 Inventory y, December 31, current year Required Compute ending inventory and cost of goods sold for the current year under FIFO, LIFO, and average cost inventory costing methods FIFO LIFO Average Cos Ending inventory Cost of goods sold

Explanation / Answer

a) FIFO Units available for sale= 2000+5000+3000=10000 Units sold=10000-4000=6000 Ending inventory=4000 Cost of goods sold Units Unit cost Total Sale from beginning inventory 2000 5 10000 Sale from purchase March 21 4000 6 24000 6000 34000 Ending inventory Units Unit cost Total Inventory from purchase march 21 1000 6 6000 Inventory from purchase August 1 3000 8 24000 4000 30000 Ending inventory is $30000 Cost of goods sold= $34000 b) LIFO Units available for sale= 2000+5000+3000=10000 Units sold=10000-4000=6000 Ending inventory=4000 Cost of goods sold Units Unit cost Total Sale from purchase August 1 3000 8 24000 Sale from purchase March 21 3000 6 18000 6000 42000 Ending inventory Units Unit cost Total Inventory from beginning inventory 2000 5 10000 Inventory from purchase March 21 2000 6 12000 4000 22000 Ending inventory is $22000 Cost of goods sold= $42000 c) Average cost: Unit cost= Total cost/ total number of units available for sale                    =(2000*5+5000*6+3000*8)/(2000+5000+3000)= 64000/10000= $6.4 Units available for sale= 2000+5000+3000=10000 Units sold=10000-4000=6000 Ending inventory=4000 Cost of goods sold= 6000*6.4=$38400 Ending inventory= 4000*6.4=$25600

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