The records at the end of 2010 for the Flagstaff Company showed the following fo

Question

The records at the end of 2010 for the Flagstaff Company showed the following for the one item they sell: Date of Transactions Unit Costs $20 $24 Inventory Purchase Sale Purchase Sale Units 40 120 80 40 30 1/1 3/5 5/15 $22 9/24 Required: Assuming a periodic inventory system compute the cost of goods sold during the year and the ending inventory in dollars under each of the following inventory costing methods (show computations and round to the nearest cents): 1) 2) 3) Weighted-average cost (Average cost method the book calls it) First-in, First-out (FIFO) Last-in, First-out (LIFO)

Explanation / Answer

FIFO METHOD DATE PURCHASES (Units) SALES(UNITS) COST OF GOODS SOLD Closing Inventory 1-Jan Opening inventory 40@20/Unit 40*20= $800 5-Mar 120 @ 24/unit 40*20=800 120*24=2880 Total 160units= 3680 15-May 80 40*20=800                               40*24=960 Total=1760 80*24=1920 11-Jul 40 @ 22/unit 80*24=1920 40*22=880 Total 120units =2880 24-Sep 30 30*24=720 50*24=1200 40*22=880 Total 90units=2080 Total 2480 90units = 2080 LIFO METHOD DATE PURCHASES (Units) SALES(UNITS) COST OF GOODS SOLD($) Closing Inventory($) 1-Jan Opening inventory 40@20/Unit 40*20= $800 5-Mar 120 @ 24/unit 40*20=800 120*24=2880 Total 160units= 3680 15-May 80 80*24=1920 40*24=960 40*20=800                                                                        11-Jul 40 @ 22/unit 40*22=880 40*24=960 40*20=800 24-Sep 30 30*22=660 10*22=220 40*24=960 40*20=800 Total 2580 90units = 1980 WEIGHTED AVAERAGE DATE PURCHASES (Units) SALES(UNITS) COST OF GOODS SOLD($) Closing Inventory($) 1-Jan Opening inventory 40@20/Unit 40*20= $800 5-Mar 120 @ 24/unit 40*20=800 120*24=2880 Total 160units= 3680 PER UNIT = 3680/160=$23 15-May 80 80*23=1840 80units@23=1840 11-Jul 40 @ 22/unit 80*23=1840 40*22=880 Total 120units= 2720 PER UNIT = 2720/120=$22.67 24-Sep 30 30*22.67=680.1 = 680 approx Total 90units= 2040 PER UNIT = $22.67 Total 2520 90units = 2240

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