Apr. 1 Beginng inventory 50 units @$204
10 Purchase 100 units @ $220
17 Sale 90 units
30 Ending inventory 60 units
May 2 Purchase 100 units @ $216
14 Purchase 50 units @ $224
22 Purchase 60 units @ $234
30 Sale 200 units
31 Ending inventory 70 units

I'm suppose to compute the cost of ending inventory on April 30 and May 31 using the average method. In addition determine cost of goods sold for April and May (round unit costs to cents and totals to dollars
Then I do it using the FIFO and LIFO I know what I'm suppose to do and how what I don't know is how to tell the difference between first in and first out or last in and first out.

Any help I will appriciate.

The following two threads should help you understand FIFO and LIFO. After reading these, if you want to attempt this question and post your work, we can check it for you. Thanks.

https://www.askmehelpdesk.com/finance-accounting/how-calculate-using-fifo-lifo-524811.html

https://www.askmehelpdesk.com/finance-accounting/calculating-lifo-fifo-methods-528427.html

I'm not sure where to begin I don't know if I start with the beginng inventory or the purchases.

Beginning inventory50 units @$204=10,200=20.40 a unit
Apr.1o purchase 100 units@$220=22,000=22.00 a unit
May 2 purchase 100 units@$216=21600=21.60 a unit
May14 purchase 50 units @224=11,200=22.40 a unit
May 22 purchase 60 units @$234=14040=23.40 a unit
Now I don't know where to start I have looked at your other post I get the idea but they didn't have a beginng inventory that I could see. I need a instructor that will go over this in class before we have to do the assignments I feel so stupid when I have to just wing it.
I have a total of 79,040 cost of goods avaible for sale, with a total of 360 units then 28,543 cost of ending inventory then 50,497 for cost of goods sold. Hope I haven't confuse you yet this is suppose to be the average method if I even understand it.
My first attempt of the FIFO goes like this
Apr. Sales 90 units
Apr 1 beginning inventory 50 units @204=10,200=20.40 a unit
Apr 10 purchase 100 units @ 220=22,000=22.00
May Sales 200 units
May 2 purchase 100 units @216=21600=21.60 a unit
May22 purchase 60 units@234=14040=23.40

then I have a total of 57,840 .

I'm so lost now I didn't even attempt the LIFO until you can give me some advice on what I'm doing wrong,not the answer just suggestions on where I'm going wrong. Thank you.

Let me show you how to get started.

You have:
Apr. 1 Beginning inventory 50 units @$204
10 Purchase 100 units @ $220
17 Sale 90 units
30 Ending inventory 60 units

Under FIFO, it is deemed that the units that are sold are the first units purchased. So, in this case, 90 units are sold. The first 50 would be from the beginning inventory at $204/unit. The remaining 40 sold would be from the April 10 purchase at $220/unit. The ending inventory of 60 units (50+100-90) are therefore priced at the April 10 cost of $220/unit.

In LIFO, it is deemed that the last units in are the units sold. Therefore the 90 units sold are costed at the April 10 purchase price of $220/unit. The 60 units remaining are priced at 10 units (100-90) at the $220 price and 50 units at $204. This would be (10*220)+(50*204) = 12,400. $12,400 divided by 60 units gives you a per unit cost of $206.67.

Using this, can you now do the May work?

Thank you I will do May and then let you check it for me.

FIFO 200 units sold First 60 would come from the ending inventory of April at 220/unit. The next 100 would come from prchase of May 2 at 216/unit. The remaining 40 would come from May 14 purchase at 224/unit. The ending inventory of 70 units are priced at 220/unit.

LIFO 200 units sold is at May 22 purchase price of 234/unit. The 70 remaining are priced at 10 units at 234/unit and 60 at 220/unit. (60*220)=13,200
13,200 divided by 70 gives me a unit cost of 188.57

I hope I'm close not so sure about the FIFO I used April's ending inventory.

FIFO 200 units sold First 60 would come from the ending inventory of April at 220/unit. The next 100 would come from prchase of May 2 at 216/unit. The remaining 40 would come from May 14 purchase at 224/unit. The ending inventory of 70 units are priced at 220/unit.

You got off to a good start. The only problem is the ending inventory. It looks like you picked up $220 from the beginning inventory, but that was already used in the sale of 200 units. You've used the beginning inventory, the purchase of 100 at May 2, and part of the May 14 purchase. What you have left is the remaining May 14 purchase and the May 22 purchase. Can you try again?


LIFO 200 units sold is at May 22 purchase price of 234/unit. The 70 remaining are priced at 10 units at 234/unit and 60 at 220/unit. (60*220)=13,200
13,200 divided by 70 gives me a unit cost of 188.57

I hope I'm close not so sure about the FIFO I used April's ending inventory.

May 22 was a purchase of only 60 units at $234. To get to the 200 units sold, you work up the layers until you reach 200. So you need another 140 units (200-60). Your next latest purchase is 50@ $224. After that you still have 90 remaining. Can you try again?

I have never worked so hard at being wrong evrytime,here goes another attempt.
FIFO
May 200 units sold.
First 60 would come from April 30 ending inventory at 220/unit. Then 100 from purchase of May 2 at 216/unit.The remaining 40 from May 14 purchase. The remaining 70 are broken down like this I think 10 units at 224/unit or 234/unit and the remaining 60 at 234/unit or 216/unit but I think it's the 234/unit.

LIFO
200 units sold.60 from May 22 purchase at 234/unit, 50 from May 14 purchase at 224/unit, The last 90 from May 2 purchase at 216/unit (60=50=90=200). The 10 remaining are added to 60 from April 30 ending inventory, for a total of 70 for May ending inventory. 60 units at 234/unit (608234)=14,580 10units at 216/unit (108216)=2,160 (14,580+2,160)=16,740
16,740 divided by 70=239.14
239.14 is my unit cost.

Just hang in there with me I will get this soon.

For some reason, a lot of students have problems with LIFO and FIFO. You are doing fine, and as long as you understand when this is done you should be satisfied. Haha - at least I think so. :)

FIFO - Correct, and the $234 is right. The $216 is the price of the 100 purchased May 2 and you have already used that layer to get to the 200 sold.

LIFO - Good start. The way you showed how the units are sold is correct. The only problem is the way you calculated your ending inventory. 10 units at $216 is right. The beginning inventory of 60 units is at $206.67. Look at my work for April above.

So when writing this I would say remaining 70 units at 234/unit for the FIFO.

LIFO 60 units at 206.67 =12,400
10 at 216/unit =2160 for a total of 14560 divided by 70
cost of unit 208.02 Do (I put the 10 units first when writing this out?)

you are helping me I do understand better. But then I still have cost of goods sold to go that doesn't look hard tough:)

FIFO - Not quite. The units are 10 at $224 and 60 at $234. You want to multiply that out to see the total cost of the 70 units, and divide that number to get the per unit cost. (just as you did for LIFO)

LIFO - correct as shown. It doesn't matter the order you show it.

COGS will be easy now. Basically you just adjust inventory to actual and the difference is COGS. I think you will see that when you work out the numbers.

I will do this and let you check.
I also have to do the same starting numbers using the peretual system, I will do this all then let you look over it,I don't think it will be too much of a difference. I want to try first then you will know where I am at. Will post later. Thank you for your help.

I think I'm off but here goes my average method cost of goods sold is 50497
My April cost for FIFO is 15,343
LIFO is 16,143
May is FIFO is 12,763
LIFO is 13,983

The reason I think I'm wrong is it does not match my perpetaul amount which is always suppose to match according to my book. So Iguess I have to work on that first,and the perpetual looks easy but I don't do it the same way do I? Sorry I tried.

Perpetual
April
1 Inventory 50 units @ 204
10 Puchase 100 units @ 220
Balance 150 @ 214.67 32,200
17 Sale 90 units @ 214.67 19,320
Inventory 60 units @ 214.67 14,500
Costs of goods sold 19,320

I don't think I have done this right.

May I started with the 60 unit inventory at214.67
Purchase on may 2 100/216
Purchase may14 50/224
Purchase may 22 60/234
Balance of 270 units at 227.19 (This is where I think I messed up the balance should be the 60 here at 214.67)
Sale 200 units at 227.19
Inventory 70 units at 227.19
Costs of goods sold was 45,438.
Where did I go wrong (haha at the beginng):)

It's dinner time here so I have to get my husband fed. :) I'll be back later tonight to look at this.

Perpetual
April
1 Inventory 50 units @ 204
10 Puchase 100 units @ 220
Balance 150 @ 214.67 32,200
17 Sale 90 units @ 214.67 19,320
Inventory 60 units @ 214.67 14,500
Costs of goods sold 19,320

I don't think I have done this right.

May I started with the 60 unit inventory at214.67
purchase on may 2 100/216
purchase may14 50/224
purchase may 22 60/234
Balance of 270 units at 227.19 (This is where I think I messed up the balance should be the 60 here at 214.67)
Sale 200 units at 227.19
Inventory 70 units at 227.19
costs of goods sold was 45,438.
Where did I go wrong (haha at the beginng):)

For COGS using weighted average: $19,320 is correct for April for COGS. For May, you have the right units of 270, but I have a different cost per unit. Are you still doing this manually instead of in Excel? I have a feeling that you just wrote that number wrong or read it wrong. You are very close.


I think I'm off but here goes my average method cost of goods sold is 50497
my april cost for FIFO is 15,343
LIFO is 16,143
May is FIFO is 12,763
LIFO is 13,983

The reason I think I'm wrong is it does not match my perpetaul amount which is always suppose to match according to my book. So Iguess I have to work on that first,and the perpetual looks easy but I don't do it the same way do I? Sorry I tried.



I'm not sure what you are doing here. LIFO, FIFO, and weighted average are 3 different methods of valuing inventory. You will calculate COGS in much the same way for LIFO and FIFO as you did for weighted average, but using the info you determined previously for the inventory. Let me just give you a simple example.

Copied from above:
We showed this for FIFO in April:
You have:
Apr. 1 Beginning inventory 50 units @$204
10 Purchase 100 units @ $220
17 Sale 90 units
30 Ending inventory 60 units

Under FIFO, it is deemed that the units that are sold are the first units purchased. So, in this case, 90 units are sold. The first 50 would be from the beginning inventory at $204/unit. The remaining 40 sold would be from the April 10 purchase at $220/unit. The ending inventory of 60 units (50+100-90) are therefore priced at the April 10 cost of $220/unit.

This tells us that the COGS should be the 90 units priced as: 50 @ 204 + 40 @ 220 = 19,880

Thank you so much for your help. I'm just learning how to use excel. Everyone tells me it would be better since I do write the wrong numbers. I will check my numbers.
And post my answers tom.
I have this habit of making things harder than they are. I catch on after I have seen it done or work through it with som help. I don't know if you are a teacher,but I do know you would make a great one.

Thanks. :) I wanted to be a teacher when I was growing up, but followed in my parents' footsteps. My mom was a CPA and worked as a Chief Financial Officer most of her career. My dad also got a degree in Accounting and was a Management Consultant. I have spent the last 7 years since I graduated working for CPA firms, but just left that about 2 weeks ago. I'll be starting a new job as the Acting CFO for a company while their CFO is out for a year with a new baby.

About Excel, it's essential to learn it if you are going to go on in Accounting. You will be doing many different types of spreadsheets in it. You might look into a Beginning Excel class. I think my first class in it was only a few days long, but I learned so much and built my Excel usage from there.

I'm starting to get the hang of those three methods too, I never really thought about selling inventory that way :eek:

Also, nice explanation JLo, I think I got the answers for the three methods right through all the posts in here :)

Unky, Good for you. If you keep this up, your accounting classes will be easy for you. :) When do you start school? I'm thinking it's pretty soon.

Yes, semester will start in July :)

Yes, semester will start in July :)

Good. Well, you know where to find me if you need help. ;)

Of course I do! :p