Asked by Osano Enoch on Jun 13, 2024
Verified
Lester Company sells many products. Hackenberry is one of its popular items. Below is an analysis of the inventory purchases and sales of Hackenberry for the month of March. Lester Company uses the periodic inventory system. Instructions
(a) Using the FIFO assumption calculate the amount charged to cost of goods sold for March. (Show computations)
(b) Using the weighted average method calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(c) Using the LIFO assumption calculate the amount assigned to the inventory on hand on March 31. (Show computations)
FIFO
An accounting method for valuing the cost of goods sold that assumes the earliest items purchased are the first to be sold.
Weighted Average Method
An inventory costing method that assigns a cost to inventory items based on the average cost of all similar items in inventory, weighted by the quantities purchased at different prices.
LIFO
An inventory valuation method, "Last In, First Out," where the most recently produced or purchased items are recorded as sold first.
- Derive the value of ending stock and the cost of goods sold using a variety of inventory valuation techniques.
Verified Answer
3/1100@$40=$4,0003/360@50=3,0003/1090‾@55=4,950‾\begin{array}{lrrrrr} 3 / 1 & 100 @ \$ 40 = \$ 4,000 \\3 / 3 & 60 @ 50 = 3,000 \\ 3 / 10 & \underline{90} @ 55 = \underline{4,950} \\\end{array}3/13/33/10100@$40=$4,00060@50=3,00090@55=4,950
250 units $11,950‾= the cost of qoods sold \quad\quad\quad\quad \text{250 units } \quad \underline{\$ 11,950 } =\text { the cost of qoods sold }250 units $11,950= the cost of qoods sold (b) Calculate the weighted average unit cost:
$20400 ÷ 400 = $51
$51 × units in ending inventory (400 available less 250 sold = 150)
$51 × 150 = $7650 (c) There are 150 units in ending inventory. They are comprised of the first units purchased when LIFO is assumed.
3/1100@$40=$4,0003/350‾@$50=2,500‾150units$6,500= ending inventory \begin{array} { l } 3 / 1 \quad 100 @\$ 40 = \$ 4,000 \\3 / 3 \quad \underline { 50 } @ \$ 50 = \underline { 2,500 } \\ \quad \quad150 \text{units} \quad\quad\$6,500=\text { ending inventory }\end{array}3/1100@$40=$4,0003/350@$50=2,500150units$6,500= ending inventory
Learning Objectives
- Derive the value of ending stock and the cost of goods sold using a variety of inventory valuation techniques.
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