Summary Business Accounting

Question:

Ferris Company began 2013 with 6,000 units of its principal product. The cost of each unit is $8.

Merchandise transactions for the month of January 2013 are as follows:




Required:

Calculate January’s ending inventory and cost of goods sold for the month using each of the following

alternatives:

1. FIFO, periodic system

2. LIFO, periodic system3. LIFO, perpetual system

4. Average cost, periodic system

5. Average cost, perpetual system



Answer:



Cost of goods available for sale for periodic system:



Beginning inventory (6,000 x $8.00) $ 48,000

Purchases:

, 5,000 x $ 9.00 $45,000

6,000 x $10.00 60,000 105,000

Cost of goods available (17,000 units) $153,000



1. FIFO, periodic system



Cost of goods available for sale (17,000 units) $153,000

Less: Ending inventory (determined below) (78,000)

Cost of goods sold $ 75,000



Cost of ending inventory:



Date of

purchase Units Unit cost Total cost

Jan. 10 2,000 $ 9.00 $18,000

Jan. 18 6,000 10.00 60,000

Totals 8,000 $78,000



Alternatively, cost of goods sold can be determined by adding the cost of the 6,000 units in beginning

inventory ($48,000) and the 3,000 units from the January 10 purchase ($27,000) = $75,000.