[mumamika]

Hi
I have a homework and I don't know how to do it. This is the assignment:

Beginning inventory 600 units at $4
First Purchase 900 units at $5
Second purchase 500 units at $6

Compute the cost of the ending inventory under the
a) FIFO
b) LIFO

Please help me cause I am stuck!

[combat75]

Hint: FIFO Ending Iventory more recent cost
COGS earlier cost

LIFO: Ending Inventory earlier cost
COGS more recent cost

Example of P system for FIFO
(what we purchased)

Amt units total
205 @ 10 = 2500
400 @ 12 = 4800
350 @ 13 = 4550
1000(2) units 11850 (1)

the 1 and 2 can be checked to see if U did FIFO and LIFO correct

NEXT write across to this: COGS (what we sold)
250 @ 10
400 @ 12
50 @ 13
700 units 7950

We sold 700 units and have 300 units left

To check:
300 @ 39800 (take 7950 + 39800=11850) the 39800 came from the 350 units at (300*13=39800)
The units we began with 1000 (700 sold + 300 remaining

LIFO COGS
350 @ 13 4550
350 @ 12 4200
700units 8750
Hint Start from bottom up to 700 units. 1st 350 @ 13 and to make up the rest of the 700 350 @12.
Ending Inventory (300 units)
50 @ 10 600
250 @ 12 2500
300 units 3100

8750 + 3100= 11850 See top (1)
700 + 300 = 1000

[snlodge]

In this Question you are given only the purchases which is odd.

Beginning inventory 600 units at $4
First Purchase 900 units at $5
Second purchase 500 units at $6

Compute the cost of the ending inventory under the
a) FIFO
b) LIFO

Since there is no sales in this question the ending inventory would be the same"

Beginning 600 @ $4 = $2400
First Pur. 900 @ $5 = $4500
Sec. Pur. 500 @ $6 = $3000
Ending inventory Totaling $9900

To simplify matters, lets assume that you made a sale of 1600 units after the second purchase.

In First In First Out (FIFO) Taking the inventory you bought first,

you would take
Beginning 600 @ $4 = $2400
First Pur. 900 @ $5 = $4500
Sec. Pur. 100 @ $6 = $ 600
Totaling 1600 $7500

Remember that this is the sales that you had made, so you take the sales from the total purchases that was made to arrive at the Ending Inventory,

Total Purchases $9,900
Total of Sales (COGS) $7,500
Ending Inventory $2,400

In Last In Last Out (LIFO) Taking the inventory you bought last,

you would take
Begining 200 @ $4 = $ 800
First Pur. 900 @ $5 = $4500
Sec. Pur. 500 @ $6 = $3000
Totaling 1600 $8300

Total Purchaeses $9,900
Total Sales (COGS) $8,300
Ending Inventory $1,600

Notice that if your Cost of Goods Sold(COGS) is higher then your net income will be lower and if COGS is Lower, then you net income is higher. This is why the government doesn't allow the LIFO to be used.