Question

Tamarisk, Inc. had a beginning inventory on January 1 of 293 units of Product 4-18-15 at a cost of $21 per unit. During the year, the following purchases were made.

Mar. 15 780 units at $24 Sept. 4 683 units at $27
July 20 488 units at $25 Dec. 2 195 units at $30

1,950 units were sold. Tamarisk, Inc. uses a periodic inventory system.

Required:
Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost).

Answer 1

Tamarisk, Inc.

FIFO LIFO AVERAGE-COST

Ending inventory $13,788 $10,857 $12,303

Cost of goods sold $47,576 $50,507 $49,062

Step-by-step 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.