Concept explainers
Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.
In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.
In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.
In Average Cost Method the cost of inventory is priced at the average rate of the goods available for sale. Following is the mathematical representation:
To Compute: The ending inventory at September 30, and cost of goods sold using the FIFO methods.
Explanation of Solution
Calculate the ending inventory and cost of goods sold using FIFO method.
Particulars |
Amount ($) |
Amount ($) |
Beginning inventory | 1,200 | |
Add: Purchases on: | ||
12th September | 4,635 | |
19th September | 5,200 | |
26th September | 2,100 | 11,935 |
Cost of goods available for sale | 13,135 | |
Less: Ending inventory [Table (2)] | (2,620) | |
Cost of goods sold | $10,515 |
Table (1)
Working Notes:
Calculate the amount of ending inventory using FIFO method:
FIFO method | Units | Cost ($) | Total cost ($) |
September 19 | 5 | 104 | |
September 26 | 20 | 105 | |
Value of ending inventory | $2,620 |
Table (2)
Therefore, the cost of goods sold using FIFO method is $10,515, and the ending inventory on September 30 is $2,620.
To Prove: The amount allocated to cost of goods sold under FIFO method.
Explanation of Solution
Proof of amount allocated to cost of goods sold under FIFO method.
Particulars |
Units (a) |
Unit cost ($) (b) |
Total cost ($) |
Beginning inventory | 12 | 100 | 1200 |
Purchase on 12th September | 45 | 103 | 4,635 |
Purchase on 19th September | 45 | 104 | 4,680 |
Cost of goods sold | 102 | $10,515 |
Table (3)
Therefore, it is proved that the cost of goods sold under FIFO method is $10,515.
To Compute: The ending inventory at September 30, and cost of goods sold using the LIFO methods.
Explanation of Solution
Calculate the ending inventory and cost of goods sold using LIFO method
Particulars |
Amount ($) |
Amount ($) |
Beginning inventory | 1,200 | |
Add: Purchases on: | ||
12th September | 4,635 | |
19th September | 5,200 | |
26th September | 2,100 | 11,935 |
Cost of goods available for sale | 13,135 | |
Less: Ending inventory [Table (5)] | (2,539) | |
Cost of goods sold | $10,596 |
Table (4)
Working Notes:
Calculate the amount of ending inventory using LIFO method:
LIFO method | Units | Cost ($) | Total cost ($) |
September 12 | 13 | 103 | |
Beginning inventory on September 1 | 12 | 100 | |
Value of ending inventory | $2,539 |
Table (5)
Therefore, the cost of goods sold using LIFO method is $10,596, and the ending inventory on September 30 is $2,539.
To Prove: The amount allocated to cost of goods sold under LIFO method.
Explanation of Solution
Proof of amount allocated to cost of goods sold under LIFO method.
Particulars |
Units (a) |
Unit cost ($) (b) | Total cost ($) |
Purchase on 26th September | 20 | 105 | 2,100 |
Purchase on 19th September | 50 | 104 | 5,200 |
Purchase on 12th September | 32 | 103 | 3296 |
Beginning inventory | |||
Cost of goods sold | 121 | $10,596 |
Table (6)
Therefore, it is proved that the cost of goods sold under LIFO method is $10,596.
To Compute: The ending inventory at September 30, and cost of goods sold using the average-cost methods.
Explanation of Solution
Calculate the ending inventory using average-cost method.
Weighted average unit cost = $103.425 (1)
Ending units in hand = 25
Calculate the cost of goods sold using average-cost method.
Weighted average unit cost = $103.425 (1)
Number of units = 102
Working Notes:
Compute weighted average unit cost.
Total cost of goods available for sale = $13,135
Total units available for sale = 127
Therefore, the cost of goods sold using average-cost method is $10,549.35, and the ending inventory on September 30 is $2,585.625.
To Prove: The amount allocated to cost of goods sold under average-cost method.
Explanation of Solution
Proof of amount allocated to cost of goods sold under average-cost method.
Particulars |
Units (a) |
Unit cost ($) (b) | Total cost ($) |
Cost of goods sold | 121 | 103.425 (1) | $10,549.35 |
Table (6)
Therefore, it is proved that the cost of goods sold under average-cost method is $10,549.35.
Want to see more full solutions like this?
Chapter 6 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
- REI sells snowboards. Assume the following information relates to REI's purchases of snowboards during September. During the same month, 103 snowboards were sold. REl uses a periodic inventory system. \table[[Date,Explanation,Units,Unit Cost,Total Cost],[Sept. 1,Inventory,10,$111,$1,110 b) compute the cost of goods sold for the month using the fifo lifo and average cost methodsarrow_forwardKimberly’s boards sells a snowboard, Xpert, that has popular snowboard enthusiasts. Information relating to Kymberly’s purchases of Xpert snowboards doing September is shown below. During the same month, 124 Xpert words were sold. Kymberly's uses a periodic inventory system.arrow_forwardREI sells snowboards. Assume the following information relates to REI's purchases of snowboards during September. During the same month, 100 snowboards were sold. Additional data regarding the company's sales of snowboards are provided below. Assume that REI uses a perpetual inventory system. Compute ending inventory at September 30 using FIFO, LIFO, and moving-average. (Round answers to 0 decimal places, e.g. 125.) FIFO The ending inventory LIFO $ AVERAGE-COSTarrow_forward
- Dorothy's Boards sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Information relating to Dorothy's purchases of Xpert snowboards during September is shown below. During the same month, 126 Xpert snowboards were sold. Dorothy's uses a periodic inventory system. Date Sept. 1 Sept. 12 Sept. 19 Sept. 26 (a) Explanation Inventory Purchases (b) Purchases Purchases Totals Units Unit Cost 29 Cost of goods sold 45 20 Your Answer Correct Answer (Used) 50 e Textbook and Media 144 $95 102 104 105 The ending inventory at September 30 $ Total Cost $ $ 2,755 Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. 4,590 2,080 5,250 $14,675 FIFO The sum of ending inventory and cost of goods sold $ 1,890 12,785 For both FIFO and LIFO, calculate the sum of ending inventory and cost of goods sold. $ FIFO $ LIFO 1.710 12.965 LIFOarrow_forwardREI sells snowboards. Assume the following information relates to REI's purchases of snowboards during September. During the same month, 108 snowboards were sold. REI uses a periodic inventory system. Date Explanation Units Unit Cost Total Cost Sept. 1 Inventory 11 $116 $1,276 Sept. 12 Purchases 48 119 5,712 Sept. 19 Purchases 60 120 7,200 Sept. 26 Purchases 21 121 2,541 Totals 140 $16,729 Your answer is partially correct. Compute the ending inventory at September 30 using FIFO, LIFO, and average-cost. (Round average cost per unit to 3 decimal places, e.g. 125.153 and final answers to O decimal places, e.g. 125.) Ending inventory at September 30 eTextbook and Media FIFO 3861 $ LIFO 3775 AVERAGE-COST 3824 * Your answer is incorrect. Compute the cost of goods sold for the month using the FIFO, LIFO, and average-cost methods. (Round average cost per unit to 3 decimal places, e.g. 125.153 and final answers to O decimal places, e.g. 125.) FIFO Cost of goods sold $ 3861 LIFO 3808…arrow_forwardCrane's Boards sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Information relating to Crane's purchases of Xpert snowboards during September is shown below. During the same month, 121 Xpert snowboards were sold. Crane's uses a perpetual inventory system. Date Sept. 1 Sept. 12 Sept. 19 Sept. 26 Date Sept. 5 Sept. 16 Sept. 29 Explanation Units Inventory Purchases Purchases Purchases Totals Sale Sale Sale Totals Units 59 23 121 45 20 44 132 12 HK$1.592 50 Unit Price Show Transcribed Text Unit Cost HK$776 Show Transcribed Text Ending Inventory FIFO 1,624 The ending inventory HK$ 1.672 Show Transcribed Text 816 832 840 Total Cost HK$ 17,848 HK$ Ending Inventory Average HK$ 36,720 16,640 36,960 Compute ending inventory at September 30 using FIFO and moving-average cost. (Round per unit cost to 2 decimal places, e.g. 15.25 and final answers to O decimal places, e.g. 125.) HK$108,168 Total Cost HK$19.104 HK$198,952 81,200 98.648 Compare ending inventory using a perpetual…arrow_forward
- (c) What is gross profit under each method? Gross profit $ Save for Later FIFO LIFO Attempts: 0 of 2 uarrow_forwardREI sells snowboards. Assume the following information relates to REI's purchases of snowboards during September. During the same month, 102 snowboards were sold. REI uses a periodic inventory system. Date Explanation Units Unit Cost Total Cost Sept. 1 Sept. 12 Inventory 12 $102 $1,224 Purchases 45 105 4,725 Sept. 19 Purchases 57 106 6,042 Sept. 26 Purchases 24 107 2,568 Totals 138 $14,559 Compute the ending inventory at September 30 using FIFO, LIFO, and average-cost. (Round average cost per unit to 3 decimal places, e.g. 125.153 and final answers to O decimal places, e.g. 125.) Ending inventory at $ September 30 FIFO SA LIFO AVERAGE-COST $ SUPPORTarrow_forwardMonty sells a snowboard, EZslide, that is popular with snowboard enthusiasts. The following is information relating to Monty's beginning inventory and purchases of EZslide snowboards during September. During the same month, 100 EZslide snowboards were sold. Monty uses a periodic inventory system. Date Sept. 1 Sept. 12 Sept. 19 Sept. 26 Explanation Inventory Purchases Purchases Purchases Totals The ending inventory at September 30 Units Unit Cost Cost of goods sold 11 45 50 21 127 $93 96 $ 97 98 Total Cost $ 1,023 FIFO 4,320 Compute the ending inventory at September 30 and the cost of goods sold using the FIFO, LIFO, and average-cost methods. (Round per unit cost to 3 decimal places, e.g. 15.647 and final answers to O decimal places, e.g. 5,125.) 4,850 2,058 $12,251 $ $ LIFO Average-costarrow_forward
- Betty’s Boards sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Information relating to Betty’s purchases of Xpert snowboards during September is shown below. During the same month, 118 Xpert snowboards were sold. Betty’s uses a periodic inventory system. Date Explanation Units Unit Cost Total Cost Sept. 1 Inventory 28 $97 $ 2,716 Sept. 12 Purchases 47 102 4,794 Sept. 19 Purchases 22 104 2,288 Sept. 26 Purchases 52 105 5,460 Totals 149 $15,258 Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. FIFO LIFO The ending inventory at September 30 $Enter a dollar amount $Enter a dollar amount Cost of goods sold $Enter a dollar amount $Enter a dollar amountarrow_forwardSharon’s Boards sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Information relating to Sharon’s purchases of Xpert snowboards during September is shown below. During the same month, 118 Xpert snowboards were sold. Sharon’s uses a periodic inventory system. Date Explanation Units Unit Cost Total Cost Sept. 1 Inventory 26 $97 $ 2,522 Sept. 12 Purchases 45 105 4,725 Sept. 19 Purchases 20 107 2,140 Sept. 26 Purchases 50 108 5,400 Totals 141 $14,787 Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. FIFO LIFO The ending inventory at September 30 $enter a dollar amount $enter a dollar amount Cost of goods sold $enter a dollar amount $enter a dollar amount For both FIFO and LIFO, calculate the sum of ending inventory…arrow_forwardREI sells snowboards. Assume the following information relates to REI's purchases of snowboards during September. During the same month, 109 snowboards were sold. REI uses a periodic inventory system. Date Sept. 1 Sept. 12 Sept. 19 Sept. 26 Explanation Units Inventory Purchases Purchases Purchases Totals 12 50 57 21 140 Unit Cost $105 108 109 110. Total Cost $1,260 5,400 6,213 FIFO 2,310 $15,183 Compute the ending inventory at September 30 using FIFO, LIFO, and average-cost. (Round average cost per unit to 3 decimal places, eg. 125.153 and final answers to O decimal places, e.g. 125.) LIFO AVERAGE-COSTarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning