The beginning inventory at Funky Party Supplies and data on purchases and sales for a three-month period ending March 31, 2016, are as follows:

Date		Transaction	Number of Units	Per Unit	Total
Jan.	1	Inventory	2,500	$60.00	$150,000
	10	Purchase	7,500	68.00	510,000
	28	Sale	3,750	120.00	450,000
	30	Sale	1,250	120.00	150,000
Feb.	5	Sale	500	120.00	60,000
	10	Purchase	18,000	70.00	1,260,000
	16	Sale	9,000	125.00	1,125,000
	28	Sale	8,500	125.00	1,062,500
Mar.	5	Purchase	15,000	71.60	1,074,000
	14	Sale	10,000	125.00	1,250,000
	25	Purchase	2,500	72.00	180,000
	30	Sale	8,750	125.00	1,093,750

	Instructions
1.	Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the first-in, first-out method The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred. and the periodic inventory system.
2.	Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the last-in, first-out method The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases. and the periodic inventory system.
3.	Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the weighted average cost method The method of inventory costing in which a weighted average unit cost for each item is computed each time a purchase is made. and the periodic inventory system. Round the weighted average unit cost to the nearest cent.
4.	Compare the gross profit and the March 31, 2016, inventories.

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X

FIFO

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1. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the first-in, first-out method

The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.

and the periodic inventory system.

Merchandise inventory, March 31, 2016
Cost of merchandise sold

Points:

0 / 2

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Check My Work

1. Note that the periodic inventory system is used in this problem. 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 merchandise sold for the period can be calculated by subtracting the ending inventory from the total cost of goods available for sale.

none

X

LIFO

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2. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the last-in, first-out method

The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases.

and the periodic inventory system.

Merchandise inventory, March 31, 2016
Cost of merchandise sold

Points:

0 / 2

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Check My Work

2. Note that the periodic inventory system is used in this problem. 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 merchandise sold for the period can be calculated by subtracting the ending inventory from the total cost of goods available for sale.

none

X

Weighted Average

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3. Determine the inventory on March 31, 2016, and the cost of goods sold for the three-month period, using the weighted average cost method

The method of inventory costing in which a weighted average unit cost for each item is computed each time a purchase is made.

and the periodic inventory system. Round the weighted average unit cost to the nearest cent.

Merchandise inventory, March 31, 2016
Cost of merchandise sold

Points:

0 / 2

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3. Note that the periodic inventory system is used in this problem. The weighted average cost means the average cost of all available units purchased is applied to the number of units sold and those in ending inventory. Therefore, you must first obtain a unit cost by dividing the total cost of all units available for sale by the number of units available for sale. Then multiply the number of items remaining in the physical inventory times this unit cost. The cost of merchandise sold for the period can be calculated by subtracting the ending inventory from the total cost of goods available for sale.

none

X

Final Question

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4. Compare the gross profit and the March 31, 2016, inventories, using the following column headings.

Question not attempted.

Score: 0/45

1		FIFO	LIFO	Weighted Average
2	Sales
3	Cost of merchandise sold
4	Gross profit
5
6	Inventory, March 31, 2016

Solution

1		FIFO	LIFO	Weighted Average
2	Sales
3	Cost of merchandise sold
4	Gross profit
5
6	Inventory, March 31, 2016

Points:

0 / 12

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4. Recall that FIFO reports higher gross profit, net income, and inventory than the LIFO method when costs (prices) are increasing. The weighted average reports gross profit, net income, and inventory between that of FIFO and LIFO.