Problem 6-3A Headlands Industries had a beginning inventory of 99 units of Produ

Question

Problem 6-3A Headlands Industries had a beginning inventory of 99 units of Product RST at a cost of $8 per unit. During the year, purchases were: Feb. 20 584 units at $9 May 5 S50 units at $10 Headlands Industries uses a periodic inventory system. Sales totaled 1,460 units Aug. 12 367 units at $11 Dec. 8 96 units at $12 [v] Your answer is correct. (a) Determine the cost of goods available for sale The cost of goods available for sale (b) Calculate Average Cost. (Round answer to 3 decimal places,e.g. 5.125.) Average Cost 16737 9.869 SHOW LIST OF ACCOUNTS SHOW SOLUTIONSHOW ANSWER LINK TO TEXT VIDEO: SIMILAR PROBLEM Your answer is incorrect. Try again Determine the ending inventory and the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to o decimal places,e.g. 150.) FIFO LIFO AVERAGE-COST The ending inventory 1944 1656 5427 The cost of goods sold 14793 15081 11309

Explanation / Answer

(a) The cost of goods available for sale $         16,737 (b) Average cost $           9.869 © FIFO LIFO AVERAGE COST The ending inventory $            2,692 $           2,025 $ 2,329 The cost of goods sold $          14,045 $         14,712 $              14,408 (d) LIFO results in the lowest inventory amount for the balance sheet. FIFO results in the lowest cost of goods sold for the income statement. Workings: i. Unit Cost per Total Costs Unit Beginning 99 $              8.00 $         792.00 Feb 20 584 $              9.00 $     5,256.00 May 5 550 $            10.00 $     5,500.00 Aug. 12 367 $            11.00 $     4,037.00 Dec. 8 96 $            12.00 $     1,152.00 Total 1696 $   16,737.00 ii. Average cost = $    16,737.00 / 1696 = $    9.869 iii. Units available for sale 1696 Units sold 1460 Ending Inventory 236 iv. Under periodic inventory system, inventory records are updated at the end of period irrespective of whether they are purchased. FIFO stands for first in first out.It means inventory bought first would be sold first. Units Inventory 236 From Dec. 8 96 Remaning after above 140 From Aug. 12 140 Remaning after above 0 v. Cost of inventory = (140*11)+(96*12) = $       2,692 vi. Cost of goods sold = Cost of goods available for sale -Cost of ending inventory = $    16,737.00 - $                 2,692 = $    14,045.00 vii. LIFO stands for Last in first out.It means inventory bought last will be shown as sold first. Units Inventory 236 Beginning 99 Remaning after above 137 Feb 20 137 Remaning after above 0 viii. Cost of inventory = (99*8)+(137*9) = $       2,025 Cost of goods sold = Cost of goods available for sale -Cost of ending inventory = $    16,737.00 - $                 2,025 = $    14,712.00 ix. Under Average method, Inventory and cost of goods sold are recorded on the basis of average rate. Ending Inventory = Ending Inventory Units x Average rate = 236 x $    9.869 = $   2,328.97 Cost of goods sold = Units sold x Average rate = 1460 x $    9.869 = $ 14,408.03

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