Question

Ferris Company began 2018 with 8,000 units of its principal product. The cost of each unit is $7. Merchandise transactions for the month of January 2018 are as follows:

	Purchases
Date of Purchase	Units		Unit Cost*			Total Cost
Jan. 10	6,000		$	8			$	48,000
Jan. 18	8,000			9				72,000
Totals	14,000							120,000

*Includes purchase price and cost of freight.

Sales
Date of Sale	Units
Jan. 5	4,000
Jan. 12	2,000
Jan. 20	5,000
Total	11,000

11,000 units were on hand at the end of the month.

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 system.
3. LIFO, perpetual system.
4. Average cost, periodic system.
5. Average cost, perpetual system.

Answer 1

Ans. 1	Total units sold =   11,000
	FIFO:	Cost of goods available for sale			Cost of goods sold - Periodic FIFO			Ending inventory - Periodic FIFO
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beginning inventory	8000	$7.00	$56,000	8000	$7.00	$56,000	0	$7.00	$0
	Purchases:
	10-Jan	6000	$8.00	$48,000	3000	$8.00	$24,000	3000	$8.00	$24,000
	18-Jan	8000	$9.00	$72,000	0	$9.00		8000	$9.00	$72,000
	Total	22000		$176,000	11000		$80,000	11000		$96,000
	*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. 2	LIFO:	Cost of goods available for sale			Cost of goods sold - Periodic LIFO			Ending inventory - Periodic LIFO
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beginning inventory	8000	$7.00	$56,000	0	$7.00	$0	8000	$7.00	$56,000
	Purchases:
	10-Jan	6000	$8.00	$48,000	3000	$8.00	$24,000	3000	$8.00	$24,000
	18-Jan	8000	$9.00	$72,000	8000	$9.00	$72,000	0	$9.00	$0
	Total	22000		$176,000	11000		$96,000	11000		$80,000
	*In LIFO method the units that have purchased last, are released the first one and ending inventory units remains from the first purchases.
Ans. 3	LIFO Perpetual	Purchase			Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Jan	8000	$7.00	$56,000				8000	$7.00	$56,000
	05-Jan				4000	$7.00	$28,000	4000	$7.00	$28,000
	10-Jan	6000	$8.00	$48,000				4000	$7.00	$28,000
								6000	$8.00	$48,000
	12-Jan				2000	$8.00	$16,000	4000	$7.00	$32,000
								4000	$8.00	$32,000
	18-Jan	8000	$9.00	$72,000				4000	$7.00	$32,000
								4000	$8.00	$32,000
								8000	$9.00	$72,000
	20-Jan				5000	$9.00	$45,000	4000	$7.00	$28,000
								4000	$8.00	$32,000
								3000	$9.00	$27,000
	Total				Cost of goods sold		$89,000	Cost of Ending inventory		$87,000

Ans. 4 Average cost: Cost of goods available for sale Rate $7.00 Cost of goods sold - Periodic Average cost Units Rate Total Ending inventory - Periodic Average cost Units Rate Total Units 8000 Total $56,000 Beginning inventory Purchases: 10-Jan 18-Jan Total 6000 8000 22000 $8.00 $9.00 $48,000 $72,000 $176,000 11000 $8.00 $88,000 11000 $8.00 $88,000 Average cost per unit = Total cost of goods available for sale / Units available for sale $176,000 / 22,000 $8.00 per unit Ans. 5 Cost of goods sold Rate Quantity Total cost Rate $7.00 Total cost $56,000 4000 $7.00 $28,000 Average cost (Perpetual): Purchase Date Quantity 01-Jan 8000 05-Jan 10-Jan 6000 12-Jan 18-Jan 8000 20-Jan Total $8.00 $48,000 Balance Quantity Rate 8000 $7.00 4000 $7.00 10000 $7.60 8000 $7.60 16000 $8.30 11000 $8.30 Cost of Ending inventory Total cost $56,000 $28,000 $76,000 $60,800 $132,800 $91,300 $91,300 2000 $7.60 $15,200 $9.00 $72,000 $8.30 5000 Cost of goods sold $41,500 $84,700 *Weighted average rate is calculated by using the formula of (Total available balance / Total units available).