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Inventory Question With Solution

The document presents an inventory example using a periodic inventory system, detailing purchases made in August and the calculation of Cost of Goods Sold (COGS) and Ending Inventory using FIFO, LIFO, and Weighted Average methods. The total units available for sale were 400, with 300 units sold, resulting in different COGS and Ending Inventory values for each method. FIFO COGS is $6,960 with an Ending Inventory of $2,520, LIFO COGS is $7,520 with an Ending Inventory of $2,160, and Weighted Average COGS is $7,260 with an Ending Inventory of $2,420.

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51 views2 pages

Inventory Question With Solution

The document presents an inventory example using a periodic inventory system, detailing purchases made in August and the calculation of Cost of Goods Sold (COGS) and Ending Inventory using FIFO, LIFO, and Weighted Average methods. The total units available for sale were 400, with 300 units sold, resulting in different COGS and Ending Inventory values for each method. FIFO COGS is $6,960 with an Ending Inventory of $2,520, LIFO COGS is $7,520 with an Ending Inventory of $2,160, and Weighted Average COGS is $7,260 with an Ending Inventory of $2,420.

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Inventory Example - Periodic Inventory System with Solution

A business made the following purchases in August:

| Date | Activity | Units Purchased | Unit Cost | Total Cost |

|------------|---------------------|------------------|-----------|------------|

| August 1 | Beginning Inventory | 70 | $21 | $1,470 |

| August 5 | Purchase | 130 | $23 | $2,990 |

| August 15 | Purchase | 90 | $25 | $2,250 |

| August 27 | Purchase | 110 | $27 | $2,970 |

Assume that during August, the company sold 300 units.

Required:

- Calculate the Cost of Goods Sold (COGS)

- Calculate the Ending Inventory

Using the following methods:

1. FIFO (First-In, First-Out)

2. LIFO (Last-In, First-Out)

3. Weighted Average Cost

Solution:

Total Units Available for Sale = 70 + 130 + 90 + 110 = 400 units


Total Cost Available for Sale = $1,470 + $2,990 + $2,250 + $2,970 = $9,680
Units Sold = 300, Ending Inventory = 100

FIFO:
- COGS = (70×21) + (130×23) + (100×25) = $1,470 + $2,990 + $2,500 = $6,960
Inventory Example - Periodic Inventory System with Solution

- Ending Inventory = (90×25) + (10×27) = $2,250 + $270 = $2,520

LIFO:
- COGS = (110×27) + (90×25) + (100×23) = $2,970 + $2,250 + $2,300 = $7,520
- Ending Inventory = (70×21) + (30×23) = $1,470 + $690 = $2,160

Weighted Average:
- Average Unit Cost = 9,680 / 400 = $24.20
- COGS = 300 × 24.20 = $7,260
- Ending Inventory = 100 × 24.20 = $2,420

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