Question

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Required information [The following information applies to the questions displayed below.) Laker Company reported the following January purchases and sales data for its only product. Units Acquired at Cost 200 units @ $12.50 = $2,500 Units sold at Retail 160 units @ $21.50 Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Totals 130 units@ $11.50 - 1,495 140 units @ $21.50 300 units @ $11.00 - 630 units 3,300 $ 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

Perpetual inventory System: In this system, the cost of sales and inventories are updated on every sales and purchase transactions. Ans1: Specific Identification: This method refers the tracking and costing of inventory based on the movement of specific, identifiable inventory items in and out of stock. Specific Available for Sale Cost of Good Sold Perpetual Ending inventory - Perpetual Identification Activity No of Unit | Unit Cost No of Unit Cost Per Unit COGS No of Unit Cost Per Unit Ending inventory Jan'1 Beginning inventory L 2 00 $12.50 175 $12.50 $2,187. 50 2 5 $12.50 | $312.50 Jan' 10 Purchase 130 $11.50 125 $11.50 $1,437.50 5 $11.50 $57.50 Jan' 20 Purchase 300 $11.00 300 $11.00 $3,300.00 Total 630 $35.00 300 $3,625.00 330 $3,670.00 Ans2: In weighted average cost method per unit purchase is derived by total cost of goods available for sale divided by total units of goods available at each transaction of sale or purchase Perpetual Purchase Cost of Good Sold Ending inventory Weighted No of Unit Cost Per Unit Total Cost | No of Unit Cost Per Unit COGS No of Unit Cost Per Unit Ending inventory Jan' 1 $0.00 200 $12.50 $2,500.00 Jan' 10 $12.50 $2,000.00 40 $12.50 $500.00 Average 40 $12.50 $500.00 Jan' 20 130 $11.50 $1,495.00 40 $12.50 $500.00 $11.50 $1,495.00 Average 170 $11.74 $1,995.00 Jan' 25 140 $11.74 $1,643.00 301 $11.74 $352.00 160 130 Average Jan' 30 30 30 300 $11.00 $3,300.00 $11.73 $11.74 $11.00 $11.07 $352.00 $352.00 $3,300.00 $3,652.00 300 330 430 $4,795.00 300 $3,643.00 Total Ending inventory Cost Cost of Good Sold 330 $3,652.00 $3,643.00

Ans3: First in, first out method (FIFO): In this method it is assumed that inventory which is purchased first will be sold first and the inventory will consist of recent purchases. Purchase Cost of Good Sold Perpetual FIFO Ending inventory-Perpetual FIFO Perpetual Cost of Good FIFO No of Unit Cost Per Unit Total Cost No of Unit Cost Per Unit No of Unit Cost Per Unit Ending inventory Sold Jan'1 $0.00 200 $12.50 $2,500.00 Jan' 10 $0.00 160 $12.50 $2,000.00 40 $12.50 $500.00 Jan' 20 130 $11.50 $1,495.00 $0.00 40 $12.50 $500.00 130 $11.50 $1,495.00 $1,995.00 170 Jan' 25 $0.00 30 $11.50 $345.00 40 100 140 $12.50 $11.50 $500.00 $1,150.00 $1,650.00 Jan' 30 300 $11.00 $3,300.00 30 $11.50 $11.00 300 $345.00 $3,300.00 $3,645.00 330 430 $4,795.00 300 $3,650.00 Total Ending inventory Cost Cost of Good Sold 330 $3,645.00 $3,650.00

Ans4: Last in, first out method (LIFO): In this method it is assumed that inventory which is purchased last will be sold first and the inventory will consist of old purchases. Purchase Cost of Good Sold Perpetual LIFO Ending inventory - Perpetual LIFO Perpetual Cost of Good LIFO No of Unit Cost Per Unit Total Cost | No of Unit Cost Per Unit No of Unit Cost Per Unit Ending inventory Sold Jan'1 $0.00 200 $12.50 $2,500.00 Jan' 10 $0.00 160 $12.50 $2,000.00 40 $12.50 $500.00 Jan' 20 130 $11.50 $1,495.00 $12.50 $500.00 $11.50 $1,495.00 $1,995.00 160 40 Jan 25 $0.00 130 $12.50 $375.00 $11.50 $12.50 10 $1,495.00 $125.00 $1,620.00 140 $375.00 Jan' 30 300 $11.00 $3,300.00 30 300 330 $12.50 $11.00 $375.00 $3,300.00 $3,675.00 430 $4,795.00 300 $3,620.00 Total Ending inventory Cost Cost of Good Sold 330 $3,675.00 $3,620.00