Question

ACC201: Financial Accounting

ZYX Pte Ltd had a beginning inventory of 600 units (unit cost $24) for a product for the month of May. Information relating to the purchases and sales for the month were as follows:

Purchases
	Units	Cost ($)
May 3	400	30
May 10	200	34
May 19	600	40
Sales
	Units	Sales Price ($)
May 8	600	60
May 13	500	80

Required:

1. Determine the cost of goods sold and cost of ending inventory for the month of May (where applicable, please round your answers to two decimal places) using the following inventory costing methods under the periodic system:
2. 1. First-in, first out (FIFO) method.
3. 2. Last-in, first out (LIFO) method.
4. 3. Weighted Average cost method. (12 marks)

Answer 1

Ans.	Available for sale
	Date		Units	Rate	Total
	1-May		600	$24.00	$14,400
	3-May		400	$30.00	$12,000
	10-May		200	$34.00	$6,800
	19-May		600	$40.00	$24,000
	Cost of goods available for sale		1800		$57,200
	Units sold (600 + 500) = 1,100 units
	Units in ending inventory   =    Units available for sale - Units sold
	1,800 - 1,100	700 units
Ans. A	Periodic FIFO:
	Date	Units	Rate	Total
	1-May	600	$24.00	$14,400
	3-May	400	$30.00	$12,000
	10-May	100	$34.00	$3,400
	Cost of goods sold	1100		$29,800
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
	Ending inventory = Total cost of goods available for sale -   Cost of goods sold
	$57,200 - $29,800
	$27,400
Ans. B	Periodic LIFO:
	Date	Units	Rate	Total
	19-May	600	$40.00	$24,000
	10-May	200	$34.00	$6,800
	3-May	300	$30.00	$9,000
	Cost of goods sold	1100		$39,800
	*In LIFO method the units that have purchased last, are released the first one and ending inventory units
	remain from the first purchase.
	Ending inventory = Total cost of goods available for sale -   Cost of goods sold
	$57,200 - $39,800
	$17,400
Ans. C	Periodic Weighted Average:
	Average cost per unit =   Total cost of goods available for sale / Total units available
	$57,200 / 1,800
	$31.78	per unit
	Cost of goods sold   =   No. of units sold * Average cost per unit
	1,100 * $31.78
	$34,958
	Ending inventory = Total cost of goods available for sale -   Cost of goods sold
	$57,200 - $34,958
	$22,242