Answered Essay: Calculate Cost of Goods Available for Sale, Cost of Goods Sold, and Ending Inventory under Periodic FIFO, LIFO, and Weighted Average Cost

Calculate Cost of Goods Available for Sale, Cost of Goods Sold, and Ending Inventory under Periodic FIFO, LIFO, and Weighted Average Cost

In its first month of operations, Literacy for the Illiterate opened a new bookstore and bought merchandise in the following order: (1) 300 units at $7 on January 1, (2) 450 units at $8 on January 8, and (3) 750 units at $9 on January 29.
Assuming 900 units are on hand at the end of the month, calculate the cost of goods available for sale, ending inventory, and cost of goods sold under the (a) FIFO, (b) LIFO, and (c) weighted average cost flow assumptions. Assume a periodic inventory system is used. (Round “Cost per Unit” to 2 decimal places.)

Expert Answer

 

Total units purchased = 300+450+750 = 1500 units
Beginning inventory = 0; ending inventory = 900 units
Units sold = 0+1500-900 = 600 units
Cost of goods available for sale = 300*7+450*8+750*9= 12450 (same for all methods)
COST OF GOODS SOLD:
FIFO = 300*7+300*8 = 4500
LIFO = 600*9 = 5400
Weighted average:
Weighted average rate = 12450/1500 = 8.3
Cost of goods sold under weighted averqage = 600*8.3 = 4980
ENDING INVENTORY:
FIFO = 12450-4500 = 7950 (150*8+750*9)
LIFO = 12450-5400 = 7050 (300*7+450*8+150*9)
Weighted average = 12450-4980 = 7470 (900*8.3)
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