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    Inventory Using FIFO and LIFO

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    Compute inventory and cost of goods sold using FIFO and LIFO

    Andrea's Boards sells a snowboard, Xpert, that is popular with snowboard enthusiasts. information relating to Andrea's purchase of Xpert snowboards during September is shown below. During the same month, 121 Xpert snowboards were sold. Andrea's uses a periodic inventory system.

    Date Explanation Units Unit Cost Total Cost
    Sept 1 Inventory 26 $97 $2,522
    Sept 12 Purchases 45 102 4,590
    Sept 19 Purchases 20 104 2,080
    Sept 26 Purchases 50 105 5,250
    Totals 141 $14,442

    a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.
    b) For both FIFO and LIFO, calculate the sum of ending inventory and cost of goods sold. What do you notice about the answers you found for each method?

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    Solution Preview

    Dear student,
    Solution is provided in a separate excel file attached.

    Periodic system-FIFO
    Cost of Goods available for sale
    Periodi Explanation Units Unit cost Total cost
    1-Sep Beginning inventory 26 97.00 2522
    12-Sep Purchase 45 102.00 4590
    19-Sep Purchase 20 104.00 2080
    26-Sep Purchase 50 105.00 5250
    Cost of Goods available for sale 141 14442

    Ending inventory
    Date Units Unit cost Total cost
    26-Sep 20 $105.00 2100

    Total 20 2100

    In First in First out assumption 121 units from first three lots are sold.20 units unsold belongs to last lot of 26th Sept as such
    valued at $105 each i.e. 20X105 = $2100
    Cost of goods sold represents difference between total cost of goods available for ...

    Solution Summary

    In this solution, we use LIFO and FIFO to calculate the sum of the ending inventory.