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Homework answers / question archive / Lannister Inc
Lannister Inc. holds 12,000 units of inventory on January 1, 2017.
Under FIFO (first-in, first-out) the inventory lot costs are:
|
Inventory Lot |
Date |
Units |
Cost / Unit |
Total Cost |
|
H |
12/13/2016 |
6,000 |
$120 |
$720,000 |
|
I |
12/22/2016 |
6,000 |
$125 |
$750,000 |
Under LIFO (last-in, first-out) the same inventory has the following lot costs:
|
Inventory Lot |
Date |
Units |
Cost / Unit |
Total Cost |
|
A |
4/22/2012 |
2,000 |
$60 |
$120,000 |
|
F |
10/15/2014 |
4,000 |
$84 |
$336,000 |
|
I |
12/22/2016 |
6,000 |
$125 |
$750,000 |
Under average cost the same 12,000 inventory units have a total cost of $1,320,700.
During January 2017, Lannister records the following transactions (in chronological order):
In answering the following questions, assume that Lannister uses a periodic inventory system. Do not include a $ with any of your answers. Unless otherwise instructed, enter your answers as whole numbers.
1) units available for sale
| Beginning balance in units | 12,000 |
| Purchases (3000+5000) | 8,000 |
| Total goods available for sale in units | 20,000 |
#2-4) FIFO Cost of goods available for sale, ending inventory, and cost of goods sold
| Date | Units | Unit Cost | Total |
| 12/13/2016 | 6000 | 120 | 720,000 |
| 12/22/2017 | 6000 | 125 | 750,000 |
| January | 3000 | 140 | 420,000 |
| January | 5000 | 125 | 625,000 |
| Total cost of goods available for sale | 2,515,000 | ||
| Ending inventory in units= 11,000 coming from the following: | |
| January purchases (8000 units at 420,000+ 625,000) | 1,045,000 |
| 12/22/2016 (3000 units x 125) | 375,000 |
| Total cost of ending inventory | 1,420,000 |
| 9000 units sold coming from: | |||
| 12/13/2016 | 6000 units | 120 | 720,000 |
| 12/22/2016 | 3000 units | 125 | 375,000 |
| Total cost of goods sold, FIFO | 1,095,000 | ||
#5-7) LIFO Cost of goods available for sale, ending inventory, and cost of goods sold
| LIFO beginning inventory per given (120,000+336,000+750,000) | 1,206,000 |
| January purchases (420,000+625,000) | 1,045,000 |
| Total cost of goods available for sale | 2,251,000 |
| Ending inventory= 11000 units coming from: | |
| 4/22/2012 (2000 units @60/ | 120,000 |
| 10/15/2014 (4000 units@84) | 336,000 |
| 12/22/2016 (5000 units @125) | 625,000 |
| Total ending inventory | 1,081,000 |
| Units sold= 9000 units coming from: | |
| January purchases (8000 units, 420,000+625000) | 1,045,000 |
| 12/22/2016 (1000 units @125) | 125,000 |
| LIFO Cost of goods sold | 1,170,000 |
#8-11) Average Cost method cost of goods available for sale, weighted average unit cost, ending inventory, and cost of goods sold
| Beginning inventory as per given (12000 units) | 1,320,700 |
| January purchases (8000 units, 420,000+625,000) | 1,045,000 |
| Total cost of goods available for sale | 2,365,700 |
| Weighted average unit cost (2,365,700/ 20,000 units) |
118.285 |
| Ending inventory units | 11,000 |
| Multiply by: average cost | 118.285 |
| Cost of ending inventory | 1,301,135 |
| Cost of goods available for sale | 2,365,700 |
| Less: Cost of ending inventory | 1,301,135 |
| Cost of goods sold | 1,064,565 |
Step-by-step explanation
Additional note:
?In FIFO method of accounting for inventories, for every inventory sold the cost to be applied is the cost of the first or oldest purchase that are still available on hand. Simply the concept that "the first goods to be purchased should be the first to be sold" applies.
?LIFO on the other hand is the opposite of FIFO. The last or most recent goods purchased are sold first is the concept of LIFO.
? Average method on the other costs inventories by averaging the total cost of all purchases by dividing it by the total units purchased.
I hope this helps.
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