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    SE 3) Aug 1 Inventory 80 units @ $ 10 per unit $ 800
    8 Purchase 100 units @ $ 11 per unit 1,100
    22 Purchase 70 units @ $ 12 per unit 840
    Goods available for sale 250 units $ 2,740

    Aug. 15 Sale 90 units
    28 Sale 50 units
    Inventory, Aug. 31 110 units

    SE 4) Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the average-cost method under the periodic inventory system.

    SE 5) Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the FIFO method under the periodic inventory system.

    SE6) Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the LIFO method under the periodic inventory system.

    SE 7) Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the average-cost method under the perpetual inventory system.

    SE 8)Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the FIFO method under the perpetual inventory system.

    SE 9)Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the LIFO method under the perpetual inventory system.

    SE 10) Prepare a table of 7 columns that shows the ending inventory and costs of goods sold for each of the results from your calculations in SE3 through SE9. Comment on the results, including the effects of the different prices at which the merchandise was purchased. Which method(s) would result in the lowest income taxes?

    SE 11) The following schedule is based on a physical inventory and replacement costs for one product line of men's shirts:

    item Quantity Cost per unit market per unit

    Short sleeve 280 $ 24 $ 20
    Long sleeve 190 28 29
    Extra-long sleeve 80 34 35

    Determine the value of this catory of inventory at the lower of cost or market using (1) the item-by-item method and (2) the major category method.

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    Solution Preview

    _______________________________________
    SE 3) Aug 1 Inventory 80 units @ $ 10 per unit $ 800
    8 Purchase 100 units @ $ 11 per unit 1,100
    22 Purchase 70 units @ $ 12 per unit 840
    Goods available for sale 250 units $ 2,740

    Aug. 15 Sale 90 units
    28 Sale 50 units
    Inventory, Aug. 31 110 units

    SE 4) Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the average-cost method under the periodic inventory system.

    Under average-cost method under the periodic inventory system, we will find the average cost of the total inventory on hand. Therefore, the price used to calculate the cost of ending inventory and costs of goods sold can be calculated as follows: -

    = Total inventory cost/Goods available for sale

    = $2,740/250 units

    = $10.96/unit

    Cost of goods sold = (Goods available for sale - Ending inventory) x average cost

    = (250 - 110) x $10.96

    = $1,534.40

    Cost of ending inventory = Ending inventory x average cost

    = 110 x $10.96

    = $1,205.60

    SE 5) Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the FIFO method under the periodic inventory system.

    Using FIFO, units purchased first are assumed to be sold first.

    140 units sold
    = 80 units from beginning inventory of at $10 unit cost
    + 60 units from Aug 8 purchases at $11 unit cost

    Cost of goods sold = 80x$10 + 60x$11
    = $800 + $660 = $1,460

    110 units of inventory left
    = 40 units from Aug 8 purchases at $11 unit cost
    + 70 units from Aug 22 purchases at $12 unit cost

    Cost of ending inventory
    = 40x$11 + 70x$12 = $440 + $840 = $1,280

    SE6) Using the data in SE 3, calculate the cost of ending inventory and costs of goods sold according to the LIFO method under the periodic inventory system.

    Using LIFO, units purchased last are assumed to be sold first.

    140 units sold
    = 70 units from Aug 22 purchases at $12 unit cost
    + 70 units from Aug 8 purchases at $11 unit cost

    Cost of goods sold = 70x$12 + 70x$11
    = $840 + $770 = $1,610

    110 units of inventory left
    = 80 units from beginning inventory at $10 unit cost
    + 30 units from Aug 8 purchases at $11 unit cost

    Cost of ending inventory
    = 80x$10 + 30x$11
    = $800 + $330 = $1,130

    SE 7) Using the data in SE 3, ...

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