A company sells a climbing kit and uses the perpetual inventory system to account for its merchandise.

The beginning balance of the inventory and its transactions during January were as follows:

Calculate the Cost of Ending Inventory using inventory method: 

a.  LIFO method.
b. FIFO method.
c.  Weighted-average method.

SOLUTION

a.  LIFO method. (Last In First Out)

PURCHASES COGS BALANCES
Date
Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total
1-Jan 18 $ 13 $ 234
30 $ 14 $ 420 30 $ 14 $ 420
12-Jan
48 $ 654
24 $ 14 $ 336 6 $ 14 $ 84
19-Jan
$ 318
24 $ 17 $ 408 24 $ 17 $ 408
20-Jan
$ 726
24 $ 17 $ 408 3 $ 14 $ 42
27-Jan
3 $ 14 $ 42 18 $ 13 $ 234
$ 786 21 $ 276
Ending inventories are $276.

b.  FIFO method. (First In First Out)

PURCHASES COGS BALANCES
Date
Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total
1-Jan 18 $ 13 $ 234
30 $ 14 $ 420 $ 420
12-Jan
$ 654
18 $ 13 $ 234
19-Jan
6 $ 14 $ 84 24 $ 14 $ 336
24 $ 17 $ 408 24 $ 17 $ 408
20-Jan
$ 744
24 $ 14 $ 336
27-Jan
3 $ 17 $ 51 21 $ 17 $ 357
$ 705 21 $ 357
Ending inventories are $357.

c. Weighted-average method
PURCHASES COGS BALANCES
Date
Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total
1-Jan 18 $ 13 $ 234
12-Jan 30 $ 14 $ 420 48 $ 13.625 $ 654
19-Jan 24 $ 13.625 $ 327 24 $ 13.625 $ 327
20-Jan 24 $ 17 $ 408 48 $ 15.313 $ 735
27-Jan 27 $ 15.31 $ 413 21 $ 15.31 $ 322
$ 740 21 $ 322
Ending inventories are $322.
ount for its merchandise.
re as follows:

beginning balance

(30x14+18x13)

(6x14+18x13)

(24x17+6x14+18x13)

(3x14+18x13)

beginning balance

(30x14+18x13)

(24x14)

(24x14+24x17)

(21x17)

beginning balance
Ex 2: A Company uses a weighted-average perpetual inventory system.
August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $15 per unit.
August 29, 20 units were sold.
August 31, 14 units were purchased at $16 per unit.
What is the per-unit value of ending inventory on August 31?

SOLUTION
Weighted-average method
PURCHASES SALES/COGS BALANCES
Date
Units Unit Cost Total Units Unit Cost Total Units
2-Aug 10 $ 12 $ 120 10
18-Aug 15 $ 15 $ 225 25
29-Aug 20 $ 13.80 $ 276 5
31-Aug 14 $ 16 $ 224 19
Per-unit value of ending inventories is $15.42
BALANCES
Unit Cost Total
$ 12 $ 120
$ 13.8 $ 345
$ 13.80 $ 69
$ 15.42 $ 293
Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method.

What is the cost of the ending inventory? 

SOLUTION

a.  LIFO method. (Last In First Go)

PURCHASES SALES COGS BALANCES
Date
Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total
1-Jun 15 $ 20 $ 300
15-Jun 6 $ 50 $ 300 $ 6 $ 20 $ 120 9 $ 20 $ 180
8 $ 25 $ 200 9 20 180
29-Jun
8 $25 $ 200
17 380
al inventory method.

beginning balance
Exercise 4
A company has inventory of 15 units at a cost of $12 each on August 1.
On August 5, it purchased 10 units at $13 per unit.
On August 12 it purchased 20 units at $14 per unit.
On August 15, it sold 30 units for $20 each.
Using the FIFO perpetual inventory method, what is the COGS?
What is the value of the inventory at August 15 after the sale (Ending inventories)?

SOLUTION
Units available for sale 15+10+5=30
Units in inventory = 15
Cost of inventory = 210

FIFO method. (First In First Out)

PURCHASES SALES
Date
Units Unit Cost Total Units Unit Cost Total
1-Aug
10 $ 13 $ 130
5-Aug
20 $ 14 $ 280
12-Aug

30 $ 20 $ 600
15-Aug

COGS=180+130+70=380
 COGS BALANCES
Units Unit Cost Total Units Unit Cost Total
15 $ 12 $ 180 beginning balance
$ 130
25 $ 310
$ 280
45 $ 590

$ 15 $ 12 $ 180 15 $ 14 $ 210
$ 10 $ 13 $ 130
$ 5 $ 14 $ 70
OGS=180+130+70=380 Ending inventories
Exercise 5
A company had inventory of 10 units at a cost of $20 each on November 1.
On November 2, it purchased 10 units at $22 each.
On November 6 it purchased 6 units at $25 each.
On November 8, it sold 22 units for $54 each.
Using the LIFO perpetual inventory method, what was the cost of the 22 units sold? 

SOLUTION

LIFO method :

PURCHASES SALES COGS

Date
Units Unit Cost Total Units Unit Cost Total Units
1-Nov
10 $ 22 $ 220
2-Nov

6 $ 25 $ 150
6-Nov

22 $ 54 $ 1,188 $ 6
8-Nov
$ 10
$ 6
$ 22
 COGS BALANCES
Unit Cost Total Units Unit Cost Total
10 $ 20 $ 200 beginning balance
10 $ 20 $ 200
10 $ 22 $ 220
10 $ 20 $ 200
10 $ 22 $ 220
6 $ 25 $ 150
$ 25 $ 150
$ 22 $ 220
$ 20 $ 120 4 $ 20 $ 80
$ 490 Ending inventories
A company uses the periodic inventory system and had the following activity during the current
monthly period.

In a periodic inventory system, using the weighted-average inventory method, what is the ending
inventory?
PURCHASE
SOLUTION Unit Unit Cost Total
BI 100 $ 20 $ 2,000
5-Nov 100 $ 22 $ 2,200
8-Nov 50 $ 23 $ 1,150
19-Nov 50 $ 25 $ 1,250
Total 300 $ 22 $ 6,600
Bal. 100 $ 22 $ 2,200

Ending: $2,200
Ex 7
A company made the following merchandise purchases and sales during the month of May:

There was no beginning inventory.

If the company uses the weighted average inventory valuation method and the
perpetual inventory system, what would be the cost of its ending inventory? 

SOLUTION
PURCHASES COGS BALANCES
Date
Units Unit Cost Total Units Unit Cost Total Units
1-May 380 $ 15 $ 5,700 380
5-May 270 $ 17 $ 4,590 650
10-May 400 $ 15.83 $ 6,332 250
20-May 300 $ 22 $ 6,600 550
400 $ 19.20 $ 7,678 150
BALANCES
Unit Cost Total
15 $ 5,700
$ 15.83 $ 10,290
$ 15.83 $ 3,958
$ 19.20 $ 10,558
$ 19.20 $ 2,879
At December 31, Moore Company's inventory records indicated a balance of $400,000. U
investigation it was determined that this amount included the following:
(1) $56,000 in inventory purchases made by Moore shipped from the seller Decembe
FOB shipping point, but not due to be received until January 3.
(2) $23,000 in inventory purchases made by Moore shipped from the seller Decembe
FOB destination, but not due to be received until January 2.
(3) $6,000 in goods sold by Moore with terms FOB destination on December 27. The go
expected to reach their destination until January 6.
(4) $8,000 in goods sold by Moore with terms FOB shipping point on December 27. The
not expected to reach their destination until January 4.
(5) $13,000 of goods received on consignment from Dollywood Company.
What is Moore's correct ending inventory balance at December 31?

400,000-23,000-8,000-13,000=356,000
1 Which of the following items should be included in a company's inventory at the
balance sheet date?
a. Goods in transit which were purchased f.o.b. destination.
b. Goods received from another company for sale on consignment.
c. Goods sold to a customer which are being held for the customer to call
for at his or her convenience.
d. None of these answer choices are correct.

2 Goods in transit which are shipped f.o.b. shipping point should be

a. included in the inventory of the seller
b. included in the inventory of the buyer
c. included both in the inventory of the buyer and seller
d. not included both in the inventory of the buyer and seller

If the beginning inventory for 2014 is overstated, the effects of this error
3 on cost of goods sold for 2014, net income for 2014, and assets at
December 31, 2015, respectively, are
a. understatement, no effect, overstatement.
b. understatement, overstatement, no effect.
c. overstatement, understatement, no effect.
d. None of these answer choices are correct.

4 Use the following information from Marvel Company for the month of July to answer
questions 1 through 4.
Jul-01 Beginning inventory . . . . . . . . 75 units @ $25 each
Jul-03 Purchase . . . . . . . . . . . . . . . . . 348 units @ $27 each
Jul-08 Sale . . . . . . . . . . . . . . . . . . . . . 300 units
Jul-15 Purchase . . . . . . . . . . . . . . . . . 257 units @ $28 each
Jul-23 Sale . . . . . . . . . . . . . . . . . . . . . 275 units

1. Perpetual:
Assume that Marvel uses a perpetual FIFO inventory system. What is the dollar
value of its ending inventory?
a. $2,940 d. $2,852
b. $2,685 e. $2,705
c. $2,625

2. Perpetual: Assume that Marvel uses a perpetual LIFO inventory system. What is the dollar
value of its ending inventory?
a. $2,940
b. $2,685
c. $2,625
d. $2,852
e. $2,705
 Assume that Marvel uses a perpetual specific identification inventory system. Its
3. Perpetual: ending inventory consists of 20 units from beginning inventory, 40 units from the
July 3 purchase, and 45 units from the July 15 purchase. What is the dollar value
of its ending inventory?
a. $2,940
b. $2,685
c. $2,625
d. $2,852
e. $2,840

Assume that Marvel uses a periodic FIFO inventory system. What is the dollar
4. Periodic:
value of its ending inventory?
a. $2,940
b. $2,685
c. $2,625
d. $2,852
e. $2,705

5. Periodic: A company reports the following beginning inventory and purchases, and it ends
the period with 30 units in inventory.
Beginning inventory . . . . . . 100 units at $10 cost per unit
Purchase 1. . . . . . . . . . . . . . 40 units at $12 cost per unit
Purchase 2. . . . . . . . . . . . . . 20 units at $14 cost per unit
a. Compute ending inventory using the FIFO periodic system.
b. Compute cost of goods sold using the LIFO periodic system.
hat is the dollar

hat is the dollar

ntory system. Its
40 units from the
s the dollar value

at is the dollar

ases, and it ends