Question

Assume the following beginning inventory, purchases, and sales during the month of April: April 1 Beginning Merchandise Inventory, 10 units @ $15 each 3 7 units sold 10 Purchased 9 units at $16 23 4 units sold Determine the Cost of Goods Sold using the FIFO inventory costing method and the periodic inventory system on April 30. Assuming a perpetual inventory system and the last-in, first-out method, determine (a) the cost of the merchandise sold for the October 30 sale and (b) the inventory on October 31.

Answer 1

FIFO

Cost of Merchandise Sold = $166

Closing Inventory value = $128

LIFO

(a) Cost of Merchandise Sold = $171

(b) Closing Inventory value= $125

Step-by-step explanation:

FIFO

Under FIFO Inventory costing the unit purchased first will be sold first and recently purchased unit will be sold at last.

Date Description Units Rate Balance

April 1 Beginning Inventory 10 units $15 $150

April 3 Sale 7 units $15 -$105

April 10 Purchased 9 units $16 +$144

April 23 Sale 3 units $15 -$45

Sale 1 units $16 -$16

Cost of Merchandise Sold = $105 + 45 + 16 = $166

Closing Inventory value = 8 x $16 = $128

LIFO

Under LIFO Inventory costing the unit purchased at last will be sold first and purchased earlier unit will be sold at last.

Date Description Units Rate Balance

April 1 Beginning Inventory 10 units $15 $150

April 3 Sale 7 units $15 -$105

April 10 Purchased 9 units $16 +$144

April 23 Sale 4 units $16 -$64

(a) Cost of Merchandise Sold = $105 + $64 = $171

(b) Closing Inventory value = (3 x $15) + ( 5 x $16 ) = $125