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3a. Assume that inventory costs were declining during January. The inventory purchased on January 15 had a unit cost of $75, and the inventory purchased on January 21 had a unit cost of $70. All other information is the same. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2021?
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3b. Which method will result in the highest ending inventory balance?
Alta Ski Company's inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system. 1,200 units @ $85 each 2,500 units @ $100 each 2,300 units @ $105 each Beginning inventory, January 1, 2021 Purchases: January 15 January 21 Sales: January 5 January 22 January 29 Ending inventory, January 31, 2021 1,150 units @ $125 each 1,550 units @ $135 each 1,000 units @ $140 each 2,300 units Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods. Cost of Goods Available for Sale Cost of Goods Sold - Periodic FIFO FIFO Cost per # of units Cost of Goods Available for Sale Cost per # of units sold Cost per unit Ending Inventory - Periodic FIFO # of units Ending in ending unit inventory Inventory $ 85 0 Cost of Goods Sold unit 1,200 $ 85 102,000 $ 85 Beginning Inventory Purchases: 100 100 0 January 15 January 21 2,500 $ 100 2,300 $ 105 6,000 250,000 241,500 593,500 $ 105 0 $ 105 Total $ 0 $ 0 0 $ 0 Cost of Goods Available for Sale Cost of Goods Sold - Periodic LIFO LIFO Cost per # of units Cost per unit Cost of Goods Available for Sale # of units sold Cost per unit Cost of Goods Sold Ending Inventory - Periodic LIFO # of units in ending Ending unit Inventory inventory $ 85 Beginning Inventory 1,200 $ 85 $ 102,000 $ 85 0 Purchases: 250,000 $ 100 $ 100 January 15 January 21 Total 2,500 $ 100 2,300 $ 105 6,000 241,500 $ 105 $ 105 0 $ 593,500 0 $ 0 0 $ Assume that inventory costs were declining during January. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2021 and highest ending inventory balance? 3a. Highest cost of goods sold figure Highest ending inventory balance 3b. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods. Cost of Goods Available for Sale - FIFO Cost of Goods Sold - Periodic FIFO Inventory Balance - Periodic FIFO FIFO: Cost per Cost per # of units Cost of Goods Available for Sale # of units sold Cost per unit Cost of Goods Sold # of units in ending inventory Ending Inventory unit unit Beg. Inventory 1,200 $ 85.00 $ 102,000 $ 85.00 $ 85.00 $ 0 Purchases: 75.00 75.00 75.00 0 January 15 January 21 2,500 2,300 6,000 70.00 187,500 161,000 $ 450,500 70.00 O 70.00 Total 0 $ 0 0 $ 0 Cost of Goods Sold - Periodic LIFO Inventory Balance - Periodic LIFO LIFO: Cost of Goods Available for Sale - LIFO Cost of # of Goods units unit Available for Sale Cost per Cost per # of units sold Cost per unit Cost of Goods Sold # of units in ending inventory Ending Inventory unit 1,200 $ 85.00 $ 102,000 $ 85.00 $ 85.00 $ 0 Beg. Inventory Purchases: 75.00 75.00 75.00 0 January 15 January 21 2,500 2,300 6,000 70.00 187,500 161,000 $ 450,500 70.00 O 70.00 Total 0 $ O O $ 0
