Question

In its first month of operations, Weatherall Company made three purchases of merchandise in the following sequence: (1) 130 units at $7, (2) 480 units at $8, and (3) 140 units at $9. Assuming there are 370 units on hand, compute the cost of the ending inventory under the FIFO method and LIFO method. Weatherall uses a periodic inventory system.

a) FIFO method: $2,740; LIFO method: $2,770
b) FIFO method: $2,770; LIFO method: $2,740
c) FIFO method: $2,810; LIFO method: $2,740
d) FIFO method: $2,740; LIFO method: $2,810

Answer 1

The calculations for the cost of the ending inventory under FIFO method is $2,830 and LIFO method is $3,100 for the Weatherall Company, based on the units purchased and remaining. The provided answer options contain discrepancies with the calculated values.

Step-by-step explanation:

The subject of this question pertains to inventory costing methods in accounting, specifically focusing on the FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) methods. To calculate the cost of the ending inventory for Weatherall Company using both the FIFO and LIFO methods, we consider the purchases made and the units remaining at the end of the period.

• Under FIFO, the oldest costs are assigned to the ending inventory, which are the first units purchased. So, the cost of the ending inventory will be the sum of the earliest costs for the 370 units on hand:

130 units at $7 = $910

240 units at $8 = $1,920

Total cost = $910 + $1,920 = $2,830

• Under LIFO, the newest costs are assigned to the ending inventory, which are the last units purchased. So, the cost of the ending inventory will be the sum of the latest costs for the 370 units on hand:

140 units at $9 = $1,260

230 units at $8 = $1,840

Total cost = $1,260 + $1,840 = $3,100

It appears there may be a typo or mistake in the provided options as the calculations for both FIFO and LIFO methods here do not match the proposed answers.