Alternative Inventory Methods

Park Company's perpetual inventory records indicate the following transactions in the month of June:

	Units	Cost/Unit
Inventory, June 1	200	$3.20
Purchases:
June 3	200	3.50
June 17	250	3.60
June 24	300	3.65
Sales:
June 6	300
June 21	200
June 27	150

Required:

1.	Compute the cost of goods sold for June and the inventory at the end of June using each of the following cost flow assumptions: If required, round your answers to the nearest dollar.

1. FIFO

   Cost of Goods Sold
   Ending Inventory

2. LIFO (Round your intermediate calculations and final answers to the nearest cent.)

   Cost of Goods Sold
   Ending Inventory

3. Average cost (In your computations, round unit costs to 3 decimal places and other amounts to the nearest dollar.)

   Cost of Goods Sold
   Ending Inventory

2.

Why are the cost of goods sold and ending inventory amounts different for each of the three methods? FIFO assumes different physical units are sold than does LIFO which results in different amounts being reported as cost of goods sold .FIFO assumes different unit costs are allocated to the cost of goods sold and ending inventory than does LIFO. Under FIFO, the cost of inventory includes freight-in, storage and insurance, whereas under LIFO these costs are expensed as incurred. Under LIFO, purchase discounts are recorded as part of the cost of inventory when the discount is not taken, resulting in a higher cost of goods sold.