Chapter $6$ Homework

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Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

Jan. $1$ Inventory $6$ units at $$39$

Feb. $17$ Purchase $14$ units at $$40$

Jul. $21$ Purchase $9$ units at $$41$

Nov. $23$ Purchase $9$ units at $$43$

There are $6$ units of the item in the physical inventory at December $31.$ The periodic inventory system is used. Round average unit cost to the nearest cent and final answers to the nearest whole dollar, if required.

a$.$ Determine the inventory cost by the first$-$in$,$ first$-$out method.

b$.$ Determine the inventory cost by the last$-$in$,$ first$-$out method.

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c$.$ Determine the inventory cost by the weighted average cost method. Round average unit cost to the two decimal places, and round your final answer to the nearest dollar.

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a$.$ Note that this exercise uses the periodic inventory system. FIFO means that the first units purchased are assumed to be the first to be sold. Therefore, ending inventory costs for the period are calculated by taking the number of items remaining in the physical inventory times the most recent purchase price. If the number of items in last purchase layer is less than the number in ending inventory, the balance of the ending inventory items must be recorded at the second most recent purchase cost. The cost of goods sold for the period can be calculated by subtracting the ending inventory from the total cost of goods available for sale.

b$.$ Note that this exercise uses the periodic inventory system. LIFO means the last units purchased are assumed to be the first to be sold. Therefore the ending inventory for the period is made up of the earliest costs from the period $($the beginning inventory$).$ If the number of units in the ending inventory is greater than the units in the beginning inventory, the excess units will be recorded at the next oldest cost associated with the first purchase. The cost of goods sold for the period can be calculated by subtracting the ending inventory from the total cost of goods available for sale.

c$.$ Note that this problem uses the periodic inventory system. Weighted average cost means the average cost of all available units purchased is applied