The following information is available for Brian Company: Beginning inventory 600 units at $4,...

Question:

The following information is available for Brian Company:

Beginning inventory {eq}600 {/eq} units at {eq}\$4 {/eq}

First purchase {eq}900 {/eq} units at {eq}\$6.50 {/eq}

Second purchase {eq}500 {/eq} units at {eq}\$7.20 {/eq}

Assume that Brian uses a periodic inventory system and that there are {eq}760 {/eq} units left at the end of the month.

Instructions: Compute the cost of ending inventory under the

A) FIFO method.

B) LIFO method.

C) Average-cost method.

Inventory Valuation Methods:

There are four types of Inventory Valuation Methods that can be used by a company. These are Specific Identification, First in First Out (FIFO), Last In First Out (LIFO) and Weighted Average Cost Method. The distinction between the four is that the computation of the amount of Ending Inventory and the Cost of Sales to be reported in the Income Statement.

Answer and Explanation:

Units Cost Total Cost
Beg. Inventory 600 $4 $2,400
1st Purchases 900 6.5 5,850
2nd Purchases 500 7.2 3,600
Cost of Goods Available for Sale 2000 $5.925 $11,850
Ending Inventory in Units-Ave. Cost 760 $5.925 $21,300
Units Cost Total Cost
Beg. Inventory 600 $4 $2,400
1st Purchases 160 6.5 1,040
Ending Inventory LIFO 760 $3,440
Units Cost Total Cost
1st Purchases 160 $6.5 $1,040
2nd Purchases 500 7.2 3,600
Ending Inventory FIFO 760 $4,640


Learn more about this topic:

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Inventory Valuation Methods: Specific Identification, FIFO, LIFO & Weighted Average

from Accounting 101: Financial Accounting

Chapter 6 / Lesson 11
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