Question

Laker Company reported the following January purchases and sales data for its only product.

Date			Activities	Units Acquired at Cost								Units sold at Retail
Jan.	1		Beginning inventory	200	units	@	$	12.50	=	$	2,500
Jan.	10		Sales										160	units	@	$	21.50
Jan.	20		Purchase	130	units	@	$	11.50	=		1,495
Jan.	25		Sales										140	units	@	$	21.50
Jan.	30		Purchase	300	units	@	$	11.00	=		3,300
			Totals	630	units					$	7,295		300	units

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 330 units, where 300 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory.

Required:
1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.
2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.
3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.
4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

Answer 1

Ans. 1	Specific identification:
		Available for sale				Cost of goods sold			Ending inventory
	Purchase date	Activity	Units	Rate	Cost	Units	Rate	Cost	Units	Rate	Cost
	1-Jan	Beginning inventory	200	$12.50	$2,500	175	$12.50	$2,188	25	$12.50	$313
	20-Jan	Purchases	130	$11.50	$1,495	125	$11.50	$1,438	5	$11.50	$58
	30-Jan	Purchases	300	$11.00	$3,300	0	$11.00	$0	300	$11.00	$3,300
	Total		630		$7,295	Cost of goods sold		$3,625	Ending inventory		$3,670
	Sold units = No. of units available on particular date - Ending inventory units on the same date.
	Purchase date	Units available (a)	Ending inventory (b)		Units sold (a - b)
	1-Jan	200	25		175
	20-Jan	130	5		125
	30-Jan	300	300		0
Ans. 2	Weighted Average (Perpetual)
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Jan	200	$12.50	$2,500				200	$12.50	$2,500
	10-Jan				160	$12.50	$2,000	40	$12.50	$500
	20-Jan	130	$11.50	$1,495				170	$11.74	1995
	25-Jan				140	$11.74	$1,643	30	$11.74	$352
	30-Jan	300	$11.00	$3,300				330	$11.07	$3,652
	Total				Cost of goods sold		$3,643	Cost of Ending inventory		$3,652
								$7,295
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).
Ans. 3	FIFO Perpetual:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Jan	200	$12.50	$2,500				200	$12.50	$2,500
	10-Jan				160	$12.50	$2,000	40	$12.50	$500
	20-Jan	130	$11.50	$1,495				40	$12.50	$500
								130	$11.50	$1,495
	25-Jan				40	$12.50	$500
					100	$11.50	$1,150	30	$11.50	$345
	30-Jan	300	$11.00	$3,300				30	$11.50	$345
								300	$11.00	$3,300
	Total				Cost of goods sold		$3,650	Cost of Ending inventory		$3,645
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
Ans. 4	Perpetual LIFO:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	1-Jan	200	$12.50	$2,500				200	$12.50	$2,500
	10-Jan				160	$12.50	$2,000	40	$12.50	$500
	20-Jan	130	$11.50	$1,495				40	$12.50	$500
								130	$11.50	$1,495
	25-Jan				130	$11.50	$1,495
					10	$12.50	$125	30	$12.50	$375
	30-Jan	300	$11.00	$3,300				30	$12.50	$375
								300	$11.00	$3,300
	Total				Cost of goods sold		$3,620	Cost of Ending inventory		$3,675
	*In LIFO method the units that have purchased last, are released the first one and the ending inventory
	units remain from the first purchases.