Question

Quick Start Company just starting business made the following four inventory purchases in June:

Date Total units Total amount
June 1 150 $ 780
June 10 200 1,170
June 15 200 1,260
June 28 150 990
A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand.
Using the LIFO inventory method, the value of the ending inventory on June 30 is
a. $1,365
b. $1,620
c. $2,580
d. $2,835
Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
a. $1,620
b. $2,290
c. $2,580
d. $2,835
Using the average cost method, the amount allocated to the ending inventory on June 30 is
a. $4,200
b. $2,700
c. $1,150
d. $1,500
Which of the following inventory costing method uses actual instead of estimate cost?
a. FIFO method
b. LIFO method
c. Average cost method
d. Specific identification method

Answer 1

a. $1,365

c. $2,580

d. $1,500

d. Specific identification method

Explanation:

1. The computation of the value of the ending inventory by using LIFO method is shown below:-

Date Total units Total amount

June 1 150 $780

June 10 200 $1,170

June 15 200 $1,260

June 28 150 $990

Goods available for

sale 700 $4,200

less: Units in ending

inventory -250

Units sold 450

Average cost = $4,200 ÷ 700

= $6.00

So, value of ending inventory = 780 + (1,170 × 100 ÷ 200)

= 1,365

2. The computation amount allocated to cost of goods sold for June by using FIFO inventory method

Cost of goods sold = 780 + 1,170 + (1,260 × 100 ÷ 200)

= $2,580

3. The computation of amount allocated to the ending inventory on June 30 by using average cost method is shown below:-

ending inventory on June 30

= 250 × 6

=1,500

4. d. Specific identification method