Ending Inventory and COGS calculations

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Business Finance

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Calculate ending inventory and cost of goods sold using the last in, first out (LIFO); moving; and weighted average methods.

Tony Merchandise Company has the following information for the month of February:

Feb. 2

Beginning inventory

20

units

@

$12

per unit

Feb. 5

Purchase

20

units

@

$16

per unit

Feb. 8

Sale

12

units

Feb. 21

Purchase

12

units

@

$18

per unit

Feb. 25

Sale

14

units

Answer the following questions for Tony Merchandise Company:

  1. Calculate the dollar ending inventory if first in, first out (FIFO) is used.
  2. Calculate the cost of goods sold if LIFO is used.
  3. Calculate the dollar ending inventory if weighted average is used.
  4. According to the generally accepted accounting principles (GAAP), discuss the objectives of inventory costing.
  5. Discuss the consequences of selecting one method instead of others.

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Explanation & Answer

Attached.

1

Running Head: ENDING INVENTORY AND COGS

Ending Inventory and COGS
Student Name:
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2

Ending Inventory and COGS
Question No # 1
The cost of ending inventory is calculated using FIFO costing method.
Calculating the ending inventory

Date

Transaction

Units

Unit cost

Feb-02
Feb-05
Feb-08
Feb-08

Beginning
Purchase

20
20

12
16

Balance

Feb-21
Feb-25

Purchase

8
20
12

12
16
18

Feb-25

1st purchase
2nd purchase
Ending Inventory

14
12
26

Transaction

Unit

Unit cost

Total cost

Sale

12

12

144

Sale from beg

8

12

96

Sale from 1st purchase

6

16

96

16
18
440

Question No # 2
The cost of goods sold is calculated using Last in First out (LIFO) costing method.

Cost of goods sold if LIFO is used

Date

Transaction

Units

Unit cost

Feb-02
Feb-05
Feb-08
Feb-08

Beginning
Purchase

20
20

12
16

Feb-21
Feb-25

Purchase

Balance

20
8
12

Transaction

Unit

Unit cost

Total cost

Sale

12

16

192

Sale from 2nd pur
Sale from 1st purchase

12
2

18
16

216
32

12
16
18

Cost of Goods Sold

440

3

Ending Inventory and COGS
Question No # 3
The cost of ending inventory is calculated by using weighted average costing method.

Calculate the doll...


Anonymous
I was having a hard time with this subject, and this was a great help.

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