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Inventory Valuation: FIFO, LIFO, and Average The company reported the following inventory
data for the year: Practice 9-7 Units Cost per Unit 300 $1750 Beginning inventory Purchases:
900 1,200 400 18.00 18.25 March 23. Units remaining at year-end. . . . . . .. Compute (1) cost of
goods sold and (2) ending inventory assuming (a) FIFO inventory valuation, (b)LIFOin- ventory
valuation, and (c) average cost inventory valuation. The company uses a periodic inventory
system Practice 9-8 Inventory Valuation: Complications with a Perpetual System Refer to
Practice 9-7. Assume that the sales occurred as follows: Units Sold 100 600 1,300 July 15
November 1 Total Compute (1) cost of goods sold and (2) ending inventory assuming (a) FIFO
inventory valuation, (b) LIFO inven- tory valuation, and (c) average cost inventory valuation,
The company uses a perpetual inventory system
Solution
Answer
Units sold = 2400 – 400 = 2000
FIFO
Cost of Goods available for sale
Cost of Goods Sold
Endging Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
300
17.5
5250
300
17.5
5250
0
17.5
0
Purchases:
Mar-23
900
18
16200
900
18
16200
0
18
0
Sep-16
1200
18.25
21900
800
18.25
14600
400
18.25
7300
TOTAL
2400
43350
2000
36050
400
7300
LIFO
Cost of Goods available for sale
Cost of Goods Sold
Endging Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
300
17.5
5250
0
17.5
0
300
17.5
5250
Purchases:
Mar-23
900
18
16200
800
18
14400
100
18
1800
Sep-16
1200
18.25
21900
1200
18.25
21900
0
18.25
0
TOTAL
2400
43350
2000
36300
400
7050
---Average Cost Valuation
Cost of opening units + Purchases = $43350
Opening units + Purchased units = 2400
Average cost = 43350 / 2400 = $18.0625 per unit
Cost of Goods Sold = 2000 units sold x $18.0625 = $36125
Value of ending Inventory = 400 units x $18.0625 = $7225
FIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening units
300
17.50
5250
300
17.50
5250.00
Jan 16 Sale
100
17.50
1750
200
17.50
3500.00
Mar 23 Purchase
900
18.00
16200
200
17.50
3500.00
900
18.00
16200.00
July 15 Sale
200
17.50
3500
500
18.00
9000.00
400
18.00
7200
Sept 16 Purchase
1200
18.25
21900
500
18.00
9000.00
1200
18.25
21900.00
Nov 1 Sale
500
18.00
9000
400
18.25
7300.00
800
18.25
14600
TOTAL
2400
43350
2000
36050
400
7300.00
Units
Value
Cost of Goods Sold
2000
36050
Closing Inventory
400
7300
LIFO
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening units
300
17.50
5250
300
17.50
5250.00
Jan 16 Sale
100
17.50
1750
200
17.50
3500.00
Mar 23 Purchase
900
18.00
16200
200
17.50
3500.00
900
18.00
16200.00
July 15 Sale
600
18.00
10800
200
17.50
3500.00
0
0.00
0
300
18.00
5400.00
Sept 16 Purchase
1200
18.25
21900
200
17.50
3500.00
300
18.00
5400.00
1200
18.25
21900.00
Nov 1 Sale
1200
18.25
21900
200
17.50
3500.00
100
18.00
1800
200
18.00
3600.00
TOTAL
2400
43350.00
2000
36250.00
400
7100
Units
Value
Cost of Goods Sold
2000
36250
Closing Inventory
400
7100
Moving Average cost
Opening + Purchases
Cost of Goods Sold
Closing Inventory
Opening
300
17.50
5250
300
17.50
5250.00
Jan 16 Sale
100
17.50
1750.00
200
17.50
3500.00
Mar 23 Purchase
900
18.00
16200
0.00
1100
17.91
19700.00
Jul 15 Sale
600
17.91
10745.45
500
17.91
8954.55
Sept 16 Purchase
1200
18.25
21900
1700
18.15
30854.55
Nov 1 Sale
1300
18.15
23594.65
400
18.15
7259.89
Sep 10 Sales
TOTAL
2400
43350.00
2000
36090.11
400
18.15
7259.893
Units
Value
Cost of Goods Sold
2000
36090
Closing Inventory
400
7260
FIFO
Cost of Goods available for sale
Cost of Goods Sold
Endging Inventory
Units
Cost/unit
COG for sale
Units sold
Cost/unit
COGS
Units
Cost/unit
Ending inventory
Beginning Inventory
300
17.5
5250
300
17.5
5250
0
17.5
0
Purchases:
Mar-23
900
18
16200
900
18
16200
0
18
0
Sep-16
1200
18.25
21900
800
18.25
14600
400
18.25
7300
TOTAL
2400
43350
2000
36050
400
7300

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