Question

The following represents the inventory of Rajan Company for the month of April:

April 1Beginning Inventory April 2 Sales April 3 Purchases April 10 Sales April 21 Purchases April 28 Sales 100 units @ $8 50 units 300 units@ $12 250 units 400 units $16 200 units

a. Assuming a periodic inventory system is used by Rajan Company, what is ending inventory under
LIFO?
b. Assuming a periodic inventory system is used by Rajan Company, what is cost of goods sold under
FIFO?
c. Assuming a periodic inventory system is used by Rajan Company, what is ending inventory under
the Weighted-Average Cost method?

Answer 1

A) Ending inventory under LIFO Method

	Units	Rate	Amount
Balance from April 3rd purchase	200	$    12	$ 2,400
Balance from Beginning inventory	100	$      8	$      800
Ending inventory	300		$ 3,200

B) Cost of goods sold Under FIFO Method

	Units	Rate	Amount
Sale from beginning inventory	100	$      8	$      800
Sale from April 3rd purchase	300	$    12	$ 3,600
Sale from April 21st purchase	100	$    16	$ 1,600
Cost of goods sold	500		$ 6,000

C) Ending inventory under Weighted Average Method

	Units	rate	Amount
Beginning inventory	100	$     8	$        800
April 3	300	$   12	$    3,600
April 21	400	$   16	$    6,400
Goods available for sale	800		$ 10,800

Weighted average cost per unit = value of goods available for sale / Total units available

Weighted average cost per unit = $10,800/800

Weighted average cost per unit = $13.50

Ending inventory = 300*$13.50

Ending inventory = $4,050

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