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The units of an item available for sale during the year were as follows: There are 75 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using the (a) first-in, first-out (FIFO) method; (b) last-in, first-out (LIFO) method; and (c) weighted average cost method.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 6, Problem 5BE
Textbook Problem
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The units of an item available for sale during the year were as follows:

Chapter 6, Problem 5BE, The units of an item available for sale during the year were as follows: There are 75 units of the

There are 75 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using the (a) first-in, first-out (FIFO) method; (b) last-in, first-out (LIFO) method; and (c) weighted average cost method.

To determine

Determine the following:

a) The inventory cost using first-in, first-out.

b) The inventory cost using last-in, first-out.

c) The inventory cost using weighted average cost method.

Explanation of Solution

Periodic inventory system is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Calculate the ending inventory using FIFO method.

Ending Inventory
DateUnitsUnit CostTotal Cost
November.3060$200$12,000
August.1315$180$2,700
75$14,700

Table (1)

Last-in-Last-Out:

In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.

Calculate the ending inventory using LIFO method.

Ending Inventory
DateUnitsUnit CostTotal Cost
January. 140$165$6,600
August.0735$180$6,300
75$12,900

Table (2)

Weighted -average cost method:

Under weighted average cost method, the company calculates a new average cost after every purchase is made...

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Chapter 6 Solutions

Financial And Managerial Accounting
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