
Concept explainers
Calculate ending inventory and cost of goods sold for four Inventory methods (LO6–3)
PROBLEMS: SET A
Sandra’s Purse Boutique has the following transactions related to its top-selling Cued purse for the month of October.
Required:
1 Calculate ending inventory and cost of goods sold at October 31, using the specific identification method. The October 4 sale consists of purses from beginning inventory, the October 13 sale consists of one purse from beginning inventory and two purses from the October 10 purchase, and the October 28 sale consists of three purses from the October 10 purchase and four purses from the October 20 purchase.
2. Using FIFO, calculate ending inventory and cost of goods sold at October 31.
3. Using LIFO, calculate ending inventory and cost of goods sold at October 31.
4. Using weighted-average cast, calculate ending inventory and cost of goods sold at October 31.
Calculate coding inventory, cost of goods
1.

To Compute: The ending inventory and cost of goods sold using the specific identification method.
Explanation of Solution
Specific identification method:
Specific identification method is a method in which the company records each item of the inventory at its original cost. Under this method, when the goods are sold, the company can easily identify the original costs at which they were purchased for. This method helps in arriving at the accurate cost of goods sold, and ending inventory.
Calculate the units of ending inventory.
Calculation of Ending Inventory | |||
Details | Number of Units | Rate Per Unit ($) | Total Cost ($) |
Beginning balance | 6 | ||
Less: Sales - October 4 | (4) | ||
Balance | 2 | ||
Less: Sales - October 13 | (1) | ||
Balance | 1 | 900 | 900 |
Purchases: | |||
October 10 | 5 | ||
Less: Sales - October 13 | (2) | ||
Less: Sales - October 28 | (3) | ||
Balance | 0 | 910 | 0 |
Purchases: | |||
October 20 | 4 | ||
Less: October 28 | (4) | - | |
Balance | 0 | 920 | - |
October 30 | 7 | 930 | 6,510 |
Ending Inventory | 7,410 |
Table (1)
Therefore, the cost of Ending Inventory in specific identification method is $7,410.
Calculate the cost of goods sold:
Calculation of Cost of Goods Sold | |||
Details | Number of Units | Rate Per Unit ($) | Total Cost ($) |
October 1: Beginning balance | 4 | 900 | 3,600 |
October 1: Beginning balance | 1 | 900 | 900 |
October 10: Purchase | 2 | 910 | 1,820 |
October 10: Purchase | 3 | 910 | 2,730 |
October 20: Purchase | 4 | 920 | 3,680 |
March 22 Purchase | 4 | 920 | 3,680 |
Cost of Goods Sold | 14 | 12,730 |
Table (2)
Therefore, the Cost of Goods Sold in specific identification method is $12,730.
2.

To Compute: The ending inventory and cost of goods sold using the FIFO method.
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.
Calculate the total Cost and units of Goods Available for Sales.
Calculation of Goods Available for Sales | |||
Details | Number of Units | Rate per unit ($) | Total Cost ($) |
Beginning balance | 6 | 900 | 5,400 |
Add: Purchases | |||
October 10 | 5 | 910 | 4,550 |
October 20 | 4 | 920 | 3,680 |
October 30 | 7 | 930 | 6,510 |
Total Goods available for Sale | 22 | 20,140 |
Table (3)
Calculate the units of ending inventory.
Calculation of Ending Inventory (Units) | ||
Details | Number of Units | Number of Units |
Beginning balance | 6 | |
Add: Purchases | ||
October 10 | 5 | |
October 20 | 4 | |
October 30 | 7 | |
Total Goods available for Sale | 22 | |
Less: Sales | ||
October 4 | 4 | |
October 13 | 3 | |
October 28 | 7 | |
Total Sales | (14) | |
Ending Inventory | 8 |
Table (4)
Calculate the cost of ending inventory.
The ending inventory is 8 units.
Calculation of Cost of Ending Inventory | |||
Details | Number of Units | Rate per Unit ($) | Total Cost ($) |
October 20 | 1 | 920 | 920 |
October 30 | 7 | 930 | 6,510 |
Ending Inventory | 8 | 7,430 |
Table (5)
In FIFO method the ending inventory comprises of the inventory purchased last, because the inventory purchased first were sold first.
Therefore, the cost of Ending Inventory in the FIFO is $7,430.
Cost of Goods Sold.
14 units are sold.
Calculation of Cost of Goods Sold | |||
Details | Number of Units | Rate per Unit ($) | Total Cost ($) |
Beginning Inventory | 6 | 900 | 5,400 |
March 9 Purchase | 5 | 910 | 4,550 |
March 22 Purchase | 3 | 920 | 2,760 |
Cost of Goods Sold | 14 | 12,710 |
Table (6)
As it is FIFO method the earlier purchased items will sell first.
Therefore, the Cost of Goods Sold in the FIFO Method is $12,710
3.

To Compute: The ending inventory and cost of goods sold using the LIFO method.
Explanation of Solution
Last-in-Last-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.
Ending Inventory:
Calculate the cost of ending inventory.
Calculation of Cost of Ending Inventory | |||
Details | Number of Units | Rate per Unit ($) | Total Cost ($) |
Beginning Inventory | 6 | 900 | 5,400 |
Ending Inventory | 6 | 900 | 5,400 |
Table (7)
- The ending inventory is 8 units (Refer to Table 4).
- In LIFO method, the ending inventory comprises of the inventory purchased first, because the inventory purchased last were sold first.
- Therefore, the ending inventory of 8 units is from the beginning inventory.
Therefore, the cost of Ending Inventory in the LIFO method is $5,400.
Cost of Goods Sold:
Details | Number of Units | Rate per unit ($) | Total Cost ($) |
October10 Purchase | 3 | 910 | 2,730 |
October20 Purchase | 4 | 920 | 3,680 |
October30 Purchase | 7 | 930 | 6,510 |
Cost of Goods Sold |
14 | 2,760 |
12,920 |
Table (8)
- 8 units are sold (Refer to Table 4).
- As it is LIFO method the recent purchased items will sell first.
- Hence, the cost of goods sold will be the recent purchased items.
Therefore, the Cost of Goods Sold in the LIFO Method is $12,920.
4.

To Compute: The ending inventory and cost of goods sold using the Weighted-average method.
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.
Calculate the Weighted-average cost.
Total cost of goods available for sale = $20,140 (Refer to table - 3)
Total units of goods available for sale = 22 units (Refer to table - 3)
Calculate the amount of Ending Inventory.
Weighted- average cost per unit = $915.45 (1)
Number of units in ending inventory = 22 units (Refer to table - 4)
Therefore, the cost of Ending Inventory in the Weighted-average-cost Method is $7,323.6.
Calculate the Cost of Goods Sold.
Weighted- average cost per unit= $915.45 (1)
Units sold = 14 units
Therefore, the Cost of goods sold in the Weighted-average-cost Method is $12,816.30.
Want to see more full solutions like this?
Chapter 6 Solutions
Financial Accounting
- Question 5 of 11 Your answer is partially correct. 8.87/14 E ! Here are selected 2027 transactions of Riverbed Company. Jan. 1 June 30 Dec. 31 Retired a piece of machinery that was purchased on January 1, 2017. The machine cost $63,000 and had a useful life of 10 years with no salvage value. Sold a computer that was purchased on January 1, 2024. The computer cost $40,300 and had a useful life of 5 years with no salvage value. The computer was sold for $15,100 cash. Discarded a delivery truck that was purchased on January 1, 2023. The truck cost $33,780. It was depreciated based on a 6-year useful life with a $3,000 salvage value. Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of where applicable. Riverbed Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2026.) (List all debit entries before credit entries. Credit account titles are automatically indented when amount is…arrow_forwardI need help solving this general accounting question with the proper methodology.arrow_forwardCan you explain the correct methodology to solve this general accounting problem?arrow_forward
- work Question 6 of 11 Pronghorn Company, organized in 2025, has the following transactions related to intangible assets. 1/2/27 Purchased patent (8-year life) $592,000 4/1/27 *Goodwill (indefinite life) 375,000 7/1/27 Acquired 10-year franchise; expiration date 7/1/2037 520,000 9/1/27 Incurred research and development costs 178,000 4.74/14 E *The goodwill resulted from the purchase of a small company for cash in the amount of $750,000. At the time of acquisition, the fair value of the assets totaled $1,850,000, and the fair value of the liabilities totaled $1,475,000. (a1) Your answer is partially correct. Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2027, recording any necessary amortization and reflecting all balances accurately as of that date. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually.…arrow_forwardHii, Tutor Give answerarrow_forwardCH 20 Master Budgets Extra Credit 6 Required information Part 2 of 2 3.35 points Saved Problem 20-2A (Algo) Manufacturing: Cash budget and schedule of cash payments LO P2 [The following information applies to the questions displayed below.] Built-Tight is preparing its master budget. Budgeted sales and cash payments follow: Budgeted sales July $ 56,500 August $ 72,500 September $ 55,500 Budgeted cash payments for eBook Direct materials Direct labor Overhead 15,660 3,540 19,700 12,940 2,860 16,300 13,260 2,940 16,700 Ask Print References Mc Graw Hill Help Save & Exit Submit Sales to customers are 20% cash and 80% on credit. Sales in June were $54,000. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $45,000 in cash and $4,500 in loans payable. A minimum cash balance of $45,000 is required. Loans are obtained at the end of any month when the preliminary cash balance is below $45,000. Interest is 1% per month based on the…arrow_forward
- Danbury Processing combines corn husks and methanol. After joint manufacturing costs of $4,200 have been incurred, the mixture separates into two products, cellulose fiber and methyl esters. At the split-off point, cellulose fiber can be sold for $8,300, and the methyl esters can be sold for $12,700. The cellulose fiber can be further processed at a cost of $9,100 to make biodegradable packaging, which could be sold for $21,500. The methyl esters can be further processed at a cost of $7,800 to make biodiesel, which could be sold for $18,900. What is the net increase (decrease) in operating income from biodegradable packaging?arrow_forwardWhich of the following is true about the statement of cash flows?a) It shows the profitability of the businessb) It shows how cash is generated and used in operating, investing, and financing activitiesc) It is prepared only at year-endd) It does not include cash transactions from financing activitiesneed help!arrow_forwardWhich of the following is true about the statement of cash flows?a) It shows the profitability of the businessb) It shows how cash is generated and used in operating, investing, and financing activitiesc) It is prepared only at year-endd) It does not include cash transactions from financing activitiesarrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning

