(Solved Homework): Practice 9 – 7 Inventory Valuation: FIFO, LIFO and AVERAGE…

Practice 9 – 7 Inventory Valuation: FIFO, LIFO and AVERAGE

The company reported the following inventory data for the year:

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Description	Units	Cost per Unit
Beginning inventory	300	$17.50
Purchases:
March 23	900	$18.00
September 16	1,200	$18.25
Units remaining at year-end	400

Compute (1) cost of goods sold and (2) ending inventory assuming (a) FIFO inventory valuation, (b) LIFO inventory valuation, and (c) average cost inventory valueation. The company uses a periodic inventory system.

QUESTION 2: Inventory Valuation: FIFO, LIFO and AVERAGE (refer to Practice 9-7)

Compute the ending inventory assuming the following methods:

a. FIFO inventory valuation

b. LIFO inventory valuation

c. Average Cost Inventory valuation

The company uses a periodic inventory system.

Submit your answer in the assignment section by 11:59pm Sunday, Week 3.

Expert Answer

FIFO:

Beginning Inventory = 300 units
Number of units purchased = 900 + 1,200
Number of units purchased = 2,100

Number of units available for sale = Beginning Inventory + Number of units purchased
Number of units available for sale = 300 + 2,100
Number of units available for sale = 2,400

Ending Inventory = 400 units

Number of units sold = Number of units available for sale – Ending Inventory
Number of units sold = 2,400 – 400
Number of units sold = 2,000

Cost of Goods Sold = 300*$17.50 + 900*$18.00 + 800*$18.25
Cost of Goods Sold = $36,050

Ending Inventory = 400*$18.25
Ending Inventory = $7,300

LIFO:

Beginning Inventory = 300 units
Number of units purchased = 2,100
Number of units available for sale = 2,400
Ending Inventory = 400 units
Number of units sold = 2,000

Cost of Goods Sold = 1,200*$18.25 + 800*$18.00
Cost of Goods Sold = $36,300

Ending Inventory = 300*$17.50 + 100*$18.00
Ending Inventory = $7,050

Average Cost Inventory:

Beginning Inventory = 300 units
Number of units purchased = 2,100
Number of units available for sale = 2,400

Cost of Beginning Inventory = 300*$17.50
Cost of Beginning Inventory = $5,250

Cost of Goods Purchased = 900*$18.00 + 1,200*$18.25
Cost of Goods Purchased = $38,100

Cost of Goods available for sale = Cost of Beginning Inventory + Cost of Goods Purchased
Cost of Goods available for sale = $5,250 + $38,100
Cost of Goods available for sale = $43,350

Cost per unit = Cost of Goods available for sale / Number of units available for sale
Cost per unit = $43,350 / 2,400
Cost per unit = $18.0625

Cost of Goods Sold = 2,000*$18.0625
Cost of Goods Sold = $36,125

Ending Inventory = 400*$18.0625
Ending Inventory = $7,225

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