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Homework answers / question archive / Penn Company uses a periodic inventory system

Penn Company uses a periodic inventory system

Accounting

Penn 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     2800                      9

For the current year:

Purchase, March 21                             5800                    10

Purchase,  August 1                              3800                    4

Inventory, December 31, current year    6,400 
Required: Compute ending inventory and cost of goods sold for the current year under FIFO, LIFO, and average cost inventory costing methods. (Do not round "Average cost per unit" and round your final answers to nearest whole dollar amount.) 

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Computation of the ending inventory under FIFO method:-

Total cost = (2800 * 9) + (5800 * 10) + (3800 * 4)

= 25200 + 58000 + 15200

= 98400

 Ending inventory = (3800 * 4) + ((6400 - 3800) * 10)

= 15200 + (2600 * 10)

= 15200 + 26000

= $41,200

 

Computation of the cost of goods sold under FIFO method:-

Cost of goods sold = Total cost - Ending inventory

= $98,400 - $41,200

= $57,200

 

Computation of the ending inventory under LIFO method:-

Ending inventory = (2800 * 9) + ((6400 - 2800) * 10)

= 25200 + (3600 * 10)

= 25200 + 36000

= $61,200

 

Computation of the cost of goods sold under LIFO method:-

Cost of goods sold = Total cost - Ending inventory

= $98,400 - $61,200

= $37,200

 

Computation of the ending inventory under average cost method:-

Average cost per unit = Total cost / Number of units

= $98,400 / (2800 + 5800 + 3800)

= $98,400 / 12,400

= $7.94

Ending inventory = 6,400 * $7.94

= $50,787.10

 

Computation of the cost of goods sold under average cost method:-

Cost of goods sold = Total cost - ending inventory

= $98,400 - $50,787.10

= $47,612.90

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