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Homework answers / question archive / Nittany Company uses a periodic inventory system
Nittany Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 1:
Units Unit cost
Inventory, December 31, prior year 1,840 $4
For the current year:
Purchase, March 21 5,110 $6
Purchase, August 1 2,980 $7
Inventory, December 31, current year 4,160
Required: Compute ending inventory and cost of goods sold for the current year under FIFO, LIFO, and average cost inventory costing methods. (Round "Average cost per unit" to 2 decimal places and final answers to nearest whole dollar amount)
Sales units = Total units - Ending inventory
= (1,840 + 5,110 + 2,980) - 4,160
= 9,930 - 4,160
= 5,770
Computation of the ending inventory using FIFO method:-
Ending inventory = ((5,110 - 3,930) * $6) + (2,980 * $7)
= (1,180 * $6) + (2,980 * $7)
= $7,080 + $20,860
= $27,940
Computation of the cost of goods sold using FIFO method:-
Cost of goods sold = (1,840 * $4) + ((5,770 - 1,840) * $6
= $7,360 + (3,930 * $6)
= $7,360 + $23,580
= $30,940
Computation of the ending inventory using LIFO method:-
Ending inventory = ((5,110 - 2,790) * $6) + (1,840 * $4)
= (2,320 * $6) + $7,360
= $13,920 + $7,360
= $21,280
Computation of the cost of goods sold using LIFO method:-
Cost of goods sold = (2,980 * $7) + ((5,770 - 2,980) * $6)
= $20,860 + (2,790 * $6)
= $20,860 + $16,740
= $37,600
Computation of the ending inventory using average cost method:-
Average cost per unit = Total cost / Total units
= (1,840 * $4) + (5,110 * $6) + (2,980 * $7)) / (1,840 + 5,110 + 2,980)
= ($7,360 + $30,660 + $20,860) / 9,930
= $58,880 / 9,930
= $5.93 per unit
Ending inventory = Ending inventory units * Average cost per unit
= 4,160 * $5.93
= $24,666.75 Or $24,667
Computation of the cost of goods sold using average cost method:-
Cost of goods sold = Sales units * Average cost per unit
= 5,770 * $5.93
= $34,213.25 Or $34,214
