Q29PGA_4 - Horngren'S Financial And Managerial Accounting

Question

Accounting for inventory using the perpetual inventory system—

FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO, and weighted-average Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

                                                 Units                Unit Cost               Unit Sales Price

Aug. 3            Sale                      45                                                            \) 85

8                     Purchase              90                      $ 54

21                   Sale                       85                                                               88

30                   Purchase              15                          58

 

Requirements

4. Determine the company’s cost of goods sold for August using FIFO, LIFO, and weighted-average inventory costing methods.

Step-by-Step Solution

Answer

The COGs under FIFO, LIO, and average cost methods are - $6070, $6165, and $6,080 respectively.

Step-by-Step-Solution Step 1: Cost of goods sold

The cost of goods sold is the cost of issuing stock valued under the four methods namely – FIFO, LIFO, Average cost, and specific identification method. These methods match the issuing stock’s price with the older, most recent, or on average cost. 

Step 2: Computed Cost of goods sold under the three methods

The cost of goods sold or each method has been computed in the previous subparts. The list of COGS under the three methods is as follows –

Method	COGS
FIFO	$6,070
LIFO	$6,165
Weighted Average Method	$6,080