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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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( Appendix 6B) Inventory Costing Methods: Periodic Inventory Systems.

Refer to the information for Tyler Company in Brief Exercise 6-35 and assume that the company uses the periodic inventory system.

Required:

Calculate the cost of goods sold and the cost of ending inventory using the FIFO, LIFO, and average cost methods. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest whole dollar.)

To determine

Concept introduction:

Periodic Inventory System:

The periodic inventory system records and updates the inventory at the end of a particular period. The inventory balance is not updated after each transaction and it is updated periodically.

FIFO method:

FIFO Stands for First In First Out. Under this method, the units purchased first are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the latest units purchased.

LIFO method:

LIFO Stands for Last in First Out. Under this method, the latest units purchased are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the oldest units purchased.

Average method:

Under this method, the cost per unit of the inventory is calculated as weighted average cost per unit and the cost of goods sold and inventory is calculated with the help of weighted average cost per unit.

To calculate:

The cost of goods sold and ending inventory using the FIFO, LIFO and Average Cost method assuming periodic inventory system.

Explanation

The cost of goods sold and ending inventory using the FIFO, LIFO and Average Cost method assuming periodic inventory system is calculated as follows:

Periodic Inventory System
FIFO
Units Rate Total Cost
Beginning Inventory 1000 $ 8.00 $ 8,000
Purchase-1 1200 $ 10.00 $ 12,000
Purchase-2 1600 $ 12.00 $ 19,200
Purchase-3 800 $ 16.00 $ 12,800
Goods Available for sale (A) $ 52,000
Cost of Goods Sold:
Beginning Inventory 1000 $ 8.00 $ 8,000
Purchase-1 1200 $ 10.00 $ 12,000
Purchase-2 1000 $ 12.00 $ 12,000
Cost of Goods Sold (B) $ 32,000
Ending Inventory (A-B) $ 20,000
Periodic Inventory System
LIFO
Units Rate Total Cost
Beginning Inventory 1000 $ 8.00 $ 8,000
Purchase-1 1200 $ 10.00 $ 12,000
Purchase-2 1600 $ 12...

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