Question

Refer to the information in Exercise 5-3 and assume the periodic inventory system is used. Determine the costs assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO. (Round per unit costs and inventory amounts to cents.) For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

Short answer

Particular	Specific Identification	Weighted average	FIFO	LIFO
Cost of goods sold	$1,025	923.68	$1,040	$810
Ending inventory	$924	$1,026.31	$910	$1,140

Step-by-step solution

Definition of Cost of Goods Sold

Cost of goods is a line item of the income statement used to compute the gross profit. It is deducted from the net sales of the business entity.

Specific Identification

Calculation of Ending Inventory:

Particular	Unit	X	Per unit cost	=	Total cost
Jan 30	180	X	$4.50	=	$810
Jan 20	5	X	$5	=	$25
Beginning inventory	15	X	$6	=	$90
Total	$924

Calculation of Cost of Goods Sold:

Particular	Unit	X	Per unit cost	=	Total cost
Jan 20	55	X	$5	=	$275
Beginning Inventory	125	X	$6	=	$750
Total	$1,025

Weighted Average

Calculation of Ending Inventory:

$\begin{array}{rcl}\mathrm{Ending}\mathrm{inventory}& =& \frac{\mathrm{Total}\mathrm{cost}\mathrm{of}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}}{\mathrm{Total}\mathrm{units}\mathrm{available}}\times \mathrm{Units}\mathrm{in}\mathrm{ending}\mathrm{inventory}\\ & =& \frac{\$1,950}{380}\times 200\\ & =& \$1,026.31\end{array}$

Calculation of Cost of Goods Sold:

$\begin{array}{rcl}\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}& =& \frac{\mathrm{Total}\mathrm{cost}\mathrm{of}\mathrm{goods}\mathrm{available}\mathrm{for}\mathrm{sale}}{\mathrm{Total}\mathrm{units}\mathrm{available}}\times \mathrm{Units}\mathrm{sold}\\ & =& \frac{\$1,950}{380}\times 180\\ & =& \$923.68\end{array}$

FIFO

Calculation of Ending Inventory:

Particular	Unit	X	Per unit cost	=	Total cost
Jan 30 Purchases	180	X	$4.50	=	$810
Jan 20 Purchases	20	X	$5	=	$100
Total	$910

Calculation of Cost of Goods Sold:

Particular	Unit	X	Per unit cost	=	Total cost
Jan 1	140	X	$6	=	$840
Jan 20 Purchases	40	X	$5	=	$200
Total	$1,040

LIFO

Calculation of Ending Inventory:

Particular	Unit	X	Per unit cost	=	Total cost
Jan 1	140	X	$6	=	$840
Jan 20	60	X	$5	=	$300
Total	$1,140

Calculation of Cost of Goods Sold:

Particular	Unit	X	Per unit cost	=	Total cost
Jan 30	180	X	$4.50	=	$810
Total	$810