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    Example: - The Following Units of Item X Are Available For Sale

    Uploaded by

    Akkama
    The document presents information about a firm's perpetual inventory of Item X throughout a year. It provides the units and costs of purchases and sales on various dates to calculate the cost of goods sold and ending inventory under FIFO, LIFO, and average cost methods. Under FIFO, the cost of goods sold is $526 and ending inventory is $650. Under LIFO, the cost of goods sold is $532 and ending inventory is $644. Under the average cost method, the cost of goods sold is $529 and ending inventory is $647.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Example: - The Following Units of Item X Are Available For Sale

    Uploaded by

    Akkama
    91 views2 pages
    The document presents information about a firm's perpetual inventory of Item X throughout a year. It provides the units and costs of purchases and sales on various dates to calculate the cost of goods sold and ending inventory under FIFO, LIFO, and average cost methods. Under FIFO, the cost of goods sold is $526 and ending inventory is $650. Under LIFO, the cost of goods sold is $532 and ending inventory is $644. Under the average cost method, the cost of goods sold is $529 and ending inventory is $647.

    Original Description:

    Ammahoo

    Original Title

    perpetual inv. method

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    The document presents information about a firm's perpetual inventory of Item X throughout a year. It provides the units and costs of purchases and sales on various dates to calculate the cost of goods sold and ending inventory under FIFO, LIFO, and average cost methods. Under FIFO, the cost of goods sold is $526 and ending inventory is $650. Under LIFO, the cost of goods sold is $532 and ending inventory is $644. Under the average cost method, the cost of goods sold is $529 and ending inventory is $647.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    91 views2 pages

    Example: - The Following Units of Item X Are Available For Sale

    Uploaded by

    Akkama
    The document presents information about a firm's perpetual inventory of Item X throughout a year. It provides the units and costs of purchases and sales on various dates to calculate the cost of goods sold and ending inventory under FIFO, LIFO, and average cost methods. Under FIFO, the cost of goods sold is $526 and ending inventory is $650. Under LIFO, the cost of goods sold is $532 and ending inventory is $644. Under the average cost method, the cost of goods sold is $529 and ending inventory is $647.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Example: - The following units of item X are available for sale.

    Item –X units cost


    Jan 1 inventory 20 $ 20
    4 sale 14
    10 purchase 16 21
    22 sale 8
    28 sale 4
    30 purchase 20 22
    The firm used a perpetual inventor system, and there are 30 units of one item on hand at the end
    of the year. What is the total cost of goods sold and ending inventory according to?
    A. FIFO B. LIFO C. Average Cost Method.
    First- in first – out (FIFO) method
    Using cost, costs are included in the merchandise sold in the order in which they were incurred.
    Purchases Cost of merchandise sold Inventory

    Date Quantity Unit cost Total cost Quantity Unit cost Total cost Quantity Unit cost Total cost

    1 20 20 400

    4 14 20 280 6 20 120

    10 16 21 336 6 20 120
    16 21 336
    22 6 20 120 14 21 294
    2 21 42
    28 4 21 84 10 21 210

    30 20 22 440 10 21 210
    20 22 440
    Total 26 $526 30 $650

    Thus cost of merchandise sold = $ 526, cost of ending inventory = $ 650.


    Last in First Out (LIFO) method

    Purchases Cost of merchandise sold Inventory

    Date Quantity Unit cost Total cost Quantity Unit cost Total cost Quantity Unit cost Total cost

    1 20 20 400

    4 14 20 280 6 20 120

    10 16 21 336 6 20 120
    16 21 336
    22 8 21 168 6 20 120
    8 21 168
    28 4 21 84 6 20 120
    4 21 84
    30 20 22 440 6 20 120
    4 21 84
    20 22 440
    Total 26 $532 30 $644

    Average cost method


    When the average cost method is used in a perpetual inventory system an average unit cost for
    each type of item is computed each time a purchase is made. This unit cost is then used to determine
    the cost of each sale until another purchase is made and a new average is computed. These
    averaging techniques called a moving average
    Purchases Cost of merchandise sold Inventory

    Date Quantity Unit cost Total cost Quantity Unit cost Total cost Quantity Unit cost Total cost

    Jan 1 20 20 400

    4 14 20 280 6 20 120

    10 16 21 336 22 20.7 456

    22 8 20.7 166 14 20.7 290

    28 4 20.7 83 10 20.7 207

    30 20 22 440 30 21.56 647

    Total 26 $529 30 $647

    Cost of merchandise sold = 529, Cost of ending inventory =647

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