Question

Purchases Date Units Unit Cost Sales Units July 1 9 $68 July 6 6 July 11 5 $76 July 14 5 July 21 7 $83 July 27 6

Determine the ending inventory under a perpetual inventory system using (1) FIFO, (2) moving-average, and (3) LIFO. (For calculation and answers purpose round unit costs to 2 decimal places, e.g. 15.25 and ending inventory values to 0 decimal places, e.g. 515.) FIFO MOVING-AVERAGE LIFO The ending inventory under a perpetual inventory system $enter a dollar amount $enter a dollar amount $enter a dollar amount

Which costing method produces the highest ending inventory valuation? select a method Average-cost FIFO LIFO method produces the highest ending inventory valuation.

Answer 1

Ans. 1 A	FIFO Perpetual:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Jul	9	$68.00	$612				9	$68.00	$612
	06-Jul				6	$68.00	$408	3	$68.00	$204
	11-Jul	5	$76.00	$380				3	$68.00	$204
								5	$76.00	$380
	14-Jul				3	$68.00	$204
					2	$76.00	$152	3	$76.00	$228
	21-Jul	7	$83.00	$581				3	$76.00	$228
								7	$83.00	$581
	27-Jul				3	$76.00	$228
					3	$83.00	$249	4	$83.00	$332
	Total				Cost of goods sold		$1,241	Cost of Ending inventory		$332
	*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. 1 B	Moving average	Purchase			Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Jul	9	$68.00	$612				9	$68.00	$612
	06-Jul				6	$68.00	$408	3	$68.00	$204
	11-Jul	5	$76.00	$380				8	$73.00	$584
	14-Jul				5	$73.00	$365	3	$73.00	$219
	21-Jul	7	$83.00	$581				10	$80.00	$800
	27-Jul				6	$80.00	$480	4	$80.00	$320
	Total				Cost of goods sold		$1,253	Ending inventory		$320
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).
Ans. 1 C	LIFO Perpetual:
		Purchase			Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Jul	9	$68.00	$612				9	$68.00	$612
	06-Jul				6	$68.00	$408	3	$68.00	$204
	11-Jul	5	$76.00	$380				3	$68.00	$204
								5	$76.00	$380
	14-Jul				5	$76.00	$380	3	$68.00	$204
	21-Jul	7	$83.00	$581				3	$68.00	$204
								7	$83.00	$581
	27-Jul				6	$83.00	$498	3	$68.00	$204
								1	$83.00	$83
	Total				Cost of goods sold		$1,286	Ending inventory		$287
	*In LIFO method the units that have purchased last, are released the first one and the ending inventory
	units remain from the first purchases.
Ans. 2	FIFO method produces the highest ending inventory valuation. Ending inventory of FIFO method is $332 which is higher than
	Moving average ($320) or LIFO ($287).