Question

Based on the following information, calculate the cost of goods sold and ending inventory using FIFO, LIFO, and weighted average assuming a perpetual inventory system is in place.

Beginning Balance - 220 units at $18
March 5 - Purchase 180 units for $20
April 6 - Sell 300 units for $38
June 30 - Purchase 250 units for $22
August 16 - Sell 170 units for $40

Answer 1

Cost of goods sold

FIFO = $9,140

LIFO = $9,500

Weighted average Method = 9,259

Ending inventory

FIFO = $3,520

LIFO = $3,560

Weighted average Method = $3,800

Step-by-step explanation:

FIFO aims to sell the goods which arrived first, that means those that arrived later remain in inventory.

LIFO aims to sell the recent goods first, that means the older goods remain in inventory.

Weighted Average calculates a new average with each and every purchase made and cost of sales together with inventory balance are calculated from the recent average.

Cost of goods sold calculations

FIFO = 220 x $ 18 + 80 x $20 + 80 x $20 + 90 x $22 = $9,140

LIFO = 180 x $20 + 120 x $18 + 170 x $22 = $9,500

Weighted average Method = $18.90 x 300 + $21.11 x 170 = 9,259

Ending inventory calculations

FIFO = 160 x $22 = $3,520

LIFO = 100 x $18 + 80 x $22 = $3,560

Weighted average Method = $21.11 x 180 units = $3,800