Question

Nadal Athletic has the following transactions related to its inventory for the month of August 2021:

Date	Transactions	Units		Cost per Unit				Total Cost
August 1	Beginning inventory	7		$	130			$	910
August 4	Sale ($150 each)	5
August 11	Purchase	9			120				1,080
August 13	Sale ($160 each)	7
August 20	Purchase	12			110				1,320
August 26	Sale ($170 each)	10
August 29	Purchase	12			100				1,200
								$	4,510

Required:

1. Calculate ending inventory and cost of goods sold at August 31, 2021, using the specific identification method. The August 4 sale consists of units from beginning inventory, the August 13 sale consists of units from the August 11 purchase, and the August 26 sale consists of two units from beginning inventory and eights units from the August 20 purchase.
2. Using FIFO, calculate ending inventory and cost of goods sold at August 31, 2021.
3. Using LIFO, calculate ending inventory and cost of goods sold at August 31, 2021.
4. Using weighted-average cost, calculate ending inventory and cost of goods sold at August 31, 2021.
5. Calculate sales revenue and gross profit under each of the four methods.
6. Comparing FIFO and LIFO, which one provides the more meaningful measure of ending inventory?
7. If Nadal chooses to report inventory using LIFO, record the LIFO adjusting entry.

Ending inventory not attempted Cost of goods sold not attempted

required for 1-4

Specific Identification	FIFO	LIFO	Weighted-average cost
Sales revenue	not attempted	not attempted	not attempted	not attempted
Gross profit	not attempted	not attempted	not attempted

required for 5

Comparing FIFO and LIFO, which one provides the more meaningful measure of ending inventory?

	LIFOradio button unchecked FIFOradio button unchecked

required for 6

No	Transaction	General Journal	Debit	Credit

required for 7

Answer 1

specific Identification method Cost of Goods Purchased Cost of Goods Sold Cost of Inventory Remaining Unite Units Total Mo of Units Total Cost Unit cost Unit Cost + To tal Cost Unit Cost cost 2021 7 $ 130 $ 910 Begenning Aug 1 Sale Aug & 5 $ 650 $ 130 2 $ 260 $ 130 Purchase 11 Aug 9 $120 $ 1,080 2 $ 130 $ 260 9 $ 120 Sale Aug 13 $ 1,080 $ 260 7 2 $ 130 $ 120 $ 840 2 $ 120 $ 240 Purchase Aug 20 12 $110 $1320 2 $ 260 elo e olio $ 130 $ 120 $ 240 $ 1320 $ 110 Sale Aug 26 2 $ 260 $ 120 $ 130 $ 110 8 $ 10 $ 240 $ 1,320 $ 880 4 $ 110 1992 SSAN Purchase Aug 29 12 $ 100 $ 1200 2 4 12 $ 120 $ 110 $ 100 $ 240 $ 1320 $ 1200 CSsanned with a scanner Total Pwechases in August + $ 3600 Total COGS $ 2630

27 FIFO Me thod. ( Periodic ) the For all the periodic methods the purchases from sales Calculations easier can reparate in order to make the Transaction Units Cost Price Total Cost Total Sales Date 2021 $ 910 tu Aug 1 $130 Beginning Inventory Purchase $ 1,080 $ 120 11 9 Aug $ 110 $ 1,320 12 Purchase Aug 20 $ 1,200 Purchase 12 $ 100 Aug 29 40 $ 4,510 $150 $ 750 5 4 Sale 7 $160 $ 1,120 Sale Aug 4 Aug 13 Aug 26 $ 170 10 $1,700 Sale $ 3,570 We sold 22 units during the month of August. look at owe first units Using FIFO, we must purchased and top: work OW way down from the CSScanned with CamScanner

Start with down the the q We. units I units from August 1 and work list. would then take from August 11. and 6 units 9 gines us 16 writs still short, so cuill take 6 do That we . are units from August Transaction Units Date 2021 Cost per Total Costs Unit Aug & Beginning + $130 $910 Inventory $1,080 11 Purchase Aug $ 120 9 Purchase 20 6. $ 110 $ 660 Aug 22 $ 2,650 FIFO = Now The Cost of Goods sold for Sold for the 22 units , using $ 2,650 need to look at the value of the value of the ending inuentory. left from August 20 and 12 units from August 29. We have 6 units Date Transaction Units Total Costs Price Per Unit $ 110 Purchase 6 Aug 20 $ 660 12 Aug 29 Purchase $ 100 $ 1,200 18 $ 1860 Adding COGS & Ending Inventory gives us $4,510 (cs which wittes back to goods available for sale.

LIFO method 37 We. sold 22 Using LIFO, units the month of August. must look at the last units work up our way up from the pwechased and bottom Start with up the list. from 12 units from August 29 and work would then take the 10 units We August do. Transaction Units Cost per Unit Total costs Date 2021 $ 1,200 Purchase $ 100 12 Aug 29 $ 1,100 $ 110 10 Purchase Aug 20 22 $ 2,300 LIFO The Cost of Goods Sold for the 22 units, using $ 2,300 Now, we need to look at the value of what is left in ending inventory . We have a units from August 20, a units from August 11 purchase and all the units from beginning Inventory. Cost per Unit Date Total costs Transaction Units 2021 & $ 130 $910 Beginning Inhentory Purchase $ 120 $ 1,080 9 Aug 7 Aug Aug 11 2 $ 110 $ 220 20 Purchase 18 $ 2,210 CS Scanned with CamScanner

6 Companing FIFO & LIFO Ending Inventory FIFO $ 1,860 LIFO Under $ 2,210 FIFO ending inuentory s lower than LIFO. So, it pocenides meaningful measure of ending Inventory more , CSScanned with CamScanner

5.) Gross Profit ( Total Sales - COGS) 2630 ) = $ 940. 1) specific Identification = $( 3570 Method 2,650) $ 920 2) FIFO method = $ ( 3570 3) KIFO Method = $ (3570 2300) $ 1,270 : 4) Weighted Average = $ (3,570 $ (3,570 - 2480-5) = $ 1089-5 . Cost Method م 40 we get a The company . Weighted Average units with total Cost Goods available for sale is of $4,510 ff we dinide $4510 $ 4510 by 40 , weighted average cost of $ 112• 75 ( per unit) · sold 22 cenits will use $ # 112.75 as the cost of each unit, There fore, the total Cost of Goods sold is $ 2480.5 There are 18 units rema an en (40-22). we will we will use $ 112.75 as the cost of those units an ending ľ enventory we قه well which gives balance of $ 2029.5. CSScanned with CamScanner