
Concept explainers
a.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the Specific identification method (Periodic inventory system).
a.

Explanation of Solution
Periodic inventory system:
The method or system of recording the transaction related to inventory occasionally or periodically is referred to as periodic inventory system.
Specific identification method:
Specific identification method identifies the cost of each item in ending inventory by separating purchases. In this method, the value of ending inventory is computed based on the lower of cost or market value.
Cost of goods sold:
Cost of goods sold is the accumulate total of all direct cost incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.
Ending Inventory:
It represents the quantity and price of the goods unsold and laying at the store at the end of a particular period.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the Specific identification method:
- Ascertain the amount of cost that would be allocated to ending inventory as follows:
FIFO | Units | Unit Cost ($) | Ending Inventory ($) |
January 30 | 180 | $4.50 | $810 |
January 20 | 5 | 5 | 25 |
Beginning Inventory | 15 | 6 | 90 |
Total | 200 | $925 |
Table (1)
- Ascertain the amount of cost that would be allocated to cost of goods sold as follows:
FIFO | Units | Unit Cost ($) | Cost of Goods Sold ($) |
Goods Available for Sale | 380 Table (3) | $1,950 | |
Less: Ending inventory | 925 | ||
Cost of Goods Sold | 200 Table (1) | $1,025 |
Table (2)
Working note:
Calculate total purchase:
Particular | Unit | Unit cost ($) | Total cost ($) |
Beginning Inventory | 140 | $6 | $840 |
January 20 | 60 | 5 | 300 |
January 30 | 180 | 72 | 810 |
Goods Available for Sale | 380 | $1,950 | |
Less: Cost of goods sold | 180 | ||
Ending inventory | 200 |
Table (3)
b.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the weighted average method.
b.

Explanation of Solution
Weighted-average cost method:
Under Weighted average cost method, the company calculates a new average cost after every purchase is made. It is determined by dividing the cost of goods available for sale by the units on hand.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the weighted average method as follows:
Particular | Unit | Unit cost ($) | Total cost ($) |
Cost of Goods Sold | 180 | $5.13 (1) | $923.4 |
Ending Inventory | 200 | $5.13 (1) | $1,026 |
Table (4)
Determine average unit cost:
c.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the FIFO method.
c.

Explanation of Solution
First-in-First-Out:
In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.
First-in-First-Out:
In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the FIFO method as follows:
- Ascertain the amount of cost that would be allocated to ending inventory as follows:
FIFO | Units | Unit Cost ($) | Ending Inventory ($) |
January 30 | 180 | $4.5 | 810 |
January 20 | 20 | 5 | 100 |
Total | 910 |
Table (5)
- Ascertain the amount of cost that would be allocated to cost of goods sold as follows:
FIFO | Units | Unit Cost ($) | Cost of Goods Sold ($) |
Beginning Inventory | 140 | $6 | $840 |
January 30 | 40 | 5 | 200 |
Total | 180 | $1,040 |
Table (6)
d.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the LIFO method.
d.

Explanation of Solution
Last-in-First-Out:
In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items.
Compute the amount of cost assigned to ending inventory and to the cost of goods sold under the LIFO method as follows:
- Ascertain the amount of cost that would be allocated to ending inventory as follows:
FIFO | Units | Unit Cost ($) | Ending Inventory ($) |
Beginning Inventory | 140 | $6 | $840 |
January 30 | 60 | 5 | 300 |
Total | 180 | $1,140 |
Table (7)
- Ascertain the amount of cost that would be allocated to cost of goods sold as follows:
LIFO | Units | Unit Cost | Cost of Goods Sold |
January 30 | 180 | $4.5 | 810 |
Total | 180 | $810 |
Table (8)
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