Question

Assume the following beginning inventory, purchases, and sales during the month of April: April 1 Beginning Merchandise Inventory, 10 units @ $15 each 3 7 units sold 10 Purchased 9 units at $16 23 4 units sold Determine the Cost of Goods Sold using the FIFO inventory costing method and the periodic inventory system on April 30. Assuming a perpetual inventory system and the last-in, first-out method, determine (a) the cost of the merchandise sold for the October 30 sale and (b) the inventory on October 31.

Answer 1

Answer:

FIFO

Cost of Merchandise Sold = $166

Closing Inventory value = $128

LIFO

(a) Cost of Merchandise Sold = $171

(b) Closing Inventory value= $125

Explanation:

FIFO

Under FIFO Inventory costing the unit purchased first will be sold first and recently purchased unit will be sold at last.

Date     Description                      Units       Rate   Balance

April 1      Beginning Inventory    10 units   $15       $150

April 3     Sale                               7 units     $15      -$105

April 10    Purchased                    9 units    $16      +$144

April 23   Sale                               3 units    $15      -$45

                Sale                               1 units     $16      -$16

Cost of Merchandise Sold = $105 + 45 + 16 = $166

Closing Inventory value = 8 x $16 = $128

LIFO

Under LIFO Inventory costing the unit purchased at last will be sold first and purchased earlier unit will be sold at last.

Date     Description                      Units       Rate   Balance

April 1      Beginning Inventory    10 units   $15       $150

April 3     Sale                               7 units     $15      -$105

April 10    Purchased                    9 units    $16      +$144

April 23   Sale                               4 units    $16      -$64

(a) Cost of Merchandise Sold = $105 + $64 = $171

(b) Closing Inventory value = (3 x $15) + ( 5 x $16 )  = $125