Answer:
Tamarisk, Inc.
FIFO LIFO AVERAGE-COST
Ending inventory $13,788 $10,857 $12,303
Cost of goods sold $47,576 $50,507 $49,062
Explanation:
a) Data and Calculations:
Date Transaction Units Unit Cost Total
January 1 Beginning inventory 293 $21 $6,153
Mar. 15 Purchase 780 $24 18,720
July 20 Purchase 488 $25 12,200
Sept. 4 Purchase 683 $27 18,441
Dec. 2 Purchase 195 $30 5,850
Total Goods available 2,439 $61,364
Units sold 1,950
Ending inventory 489
FIFO:
Ending inventory
= 195 at $30 = $5,850
294 at $27 = $7,938
Total 489 = $13,788
Cost of goods sold = Cost of goods available for sale minus Cost of ending inventory = $61,364 - $13,788 = $47,576
LIFO:
Ending inventory:
293 at $21 = $6,153
196 at $24 = 4,704
Total 489 = $10,857
Cost of goods sold = $61,364 - $10,857 = $50,507
Weighted-Average Cost:
Weighted-average cost = Cost of goods available for sale/Units available for sale
= $61,364/2,439 = $25.16
Ending inventory = $12,303 (489 * $25.16)
Cost of goods sold = $49,062 (1,950 * $25.16)
b) The distinguishing factor among these inventory valuation methods is the assumption basis for their computations. FIFO assumes that goods that first come into store are the first to be sold or First-in, First-out. LIFO assumes that goods that are last in the store are the first to be sold, expressed as Last-in, First-out. Lastly, the weighted average method uses the weighted average costs of inventories purchased at different times and prices to compute the cost of each unit.
