Lakia Corporation reported the following current-year purchases and sales data for its only product:
Jan. 1 Beginning inventory . . . . . . . 120 units @ $6.00 $ 720
Jan. 10 Sales . . . . . . . . . . . . . . . . . . 70 units @ $15
Mar. 7 Purchase . . . . . . . . . . . . . . . 200 units @ $5.50 1,100
Mar. 15 Sales . . . . . . . . . . . . . . . . . . 125 units @ $15
July 28 Purchase . . . . . . . . . . . . . . . 500 units @ $5.00 2,500
Oct. 3 Purchase . . . . . . . . . . . . . . . 375 units @ $4.40 1,650
Oct. 5 Sales . . . . . . . . . . . . . . . . . . 600 units @ $15
Dec. 19 Purchase . . . . . . . . . . . . . . . 100 units @ $4.10 410
Totals . . . . . . . . . . . . . .............. . . . 1,295 units $6,380 795 units
Lakia uses a perpetual inventory system. Ending inventory consists of 500 units, 400 from the July 28 purchase and 100 from the December 19 purchase. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO.
Check Ending inventory: LIFO,
$2,498;WA, $2,350
Answers & Comments
Verified answer
Since this looks like a homework question I will show you how to come up with the answers -- but I won't give you the answers.
(a) specific identification -- doesn't apply in this case since you are dealing with low cost merchandise that is not specifically identified.
(b) weighted average -- At the time of each purchase you add the cost of the quantity on hand and divide by the quantity. For example, on Mar 7 you have 50 on hand that you paid $6 for and purchased 200 at $5.50. Your total cost is $1,400 and your average weighted cost is $5.60 (1400 divided by 250).
(c) FIFO -- With First In First Out the value of the inventory is based on the most recent purchases. For example if you had 200 units on hand at the end of the period you would have all of the most recent purchase (100 at $4.10) plus 100 from the previous purchase (100 at $4.40) so your inventory value would be $850.
(d) LIFO -- With Last In First Out the value of the inventory is based on the value of the earliest purchases. For example if you had 200 units on hand at the end of the period you would have all of the beginning inventory (120 at $6.00) and 80 from the first purchase (80 at $5.50) and your inventory value would be $1,160.
Hope this helps
Jerry-the-bookkeeper