Summary Business Accounting

Question:

Altira Corporation uses a periodic inventory system. The following information related to its merchandise

inventory during the month of August 2013 is available:

Aug. 1 Inventory on hand—2,000 units; cost $6.10 each.

8 Purchased 10,000 units for $5.50 each.

14 Sold 8,000 units for $12.00 each.

18 Purchased 6,000 units for $5.00 each.

25 Sold 7,000 units for $11.00 each.

31 Inventory on hand—3,000 units.

Required:

Determine the inventory balance Altira would report in its August 31, 2013, balance sheet and the cost of

goods sold it would report in its August 2013 income statement using each of the following cost flow

methods:

1. First-in, first-out (FIFO)

2. Last-in, first-out (LIFO)

3. Average cost



Answer:



Cost of goods available for sale:

Beginning inventory (2,000 x $6.10) $12,200

Purchases:

10,000 x $5.50 $55,000

6,000 x $5.00 30,000 85,000

Cost of goods available (18,000 units) $97,200