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Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Method
Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Method. The units of an item available for sale during the year were as follows: Jan. 1 Inventory 13 units at $37 $481 Aug. 13 Purchase 18 units at $40 720 Nov. 30 Purchase 11 units at $41 451 Available for sale 42 units $1,652 There are 19 units of the item in the physical inventory at December 31. The periodic Inventory system is used. Determine t cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cos (round per-unit cost thewo decimal places and your final answer to the nearest whole dollar). 779 X a. First-in, first-out (FIFO) b. Last-in, first-out (LIFO) C Weighted average cost Feedback Check My Work a When the FIFO method is used costs are included in cost of goods sold in the order in which they were purchased When the UFO method is used the cost of the units sold is the cost of the most recent purchases The average cost method is sometimes called the weighted average med. The average cost method uses the average unit cost for determining cost of goods sold and the ending inventory Learning Objective Previous G
Expert Solution
(a) $771
(b) $721
(c) $747
Workings:
(a) FIFO:
As per the FIFO (first in first out ) method of inventory valuation, if an inventory enters the stores first, it should leave the store first, for production. Hence, the closing stock will be valued at the latest purchase prices.
Given closing inventory = 19 units
Latest purchase = 11 units
This implies that closing stock consists of 8 units (19-11) form last before purchase too.
=> Value of the closing stock = [11 units * $41] +[8 units * $40] = $771
(b) LIFO:
As per the LIFO (Last in first out ) method of inventory valuation, the inventory which enters the stores last, it should leave the store first, for production. Hence, the closing stock will be valued at the oldest purchase prices.
Given closing inventory = 19 units
Oldest purchase = 13 units
This implies that closing stock consists of 6 units (19-13) form the second oldest purchase too.
=> Value of the closing stock = [13 units * $37] +[6 units * $40] = $721
(c) Wighted average method:
As per this method, closing inventroty value at the weighted average price.
Given
Total value of the inventory = $1,652
Total units available for sale = 42 units
=> Average value per unit of the inventory = $1,652/42 = $39.33
Closing inventory in units = 19
Therefore, closing inventory value = 19*$39.33 = $747 (Rounded to the nearest dollar)
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