I am trying to compute ending inventory and cost of goods sold using FIFO AND LIFO, however, I am not able to understand what to do or how to do it. Please help
Units unit cost total cost
June 1 inv. 200 5 1000
12 purch 300 6 1800
23 puch 500 7 3500
30 inv. 160
I need to compute the cost of the ending inve. And the cost of goods sold under (a) FIFO & (b) LIFO, then tell which costing method gives the higher ending inventory and why? Which method rsults in the hgiher cost of goods sold and why?

You had 200 units at the beginning of the month. You made purchases of 300 and 500 units, so your ending inventory should be 1,000 units. However, it is only 160 units. Therefore, you must have sold 840 units.


FIFO – First in First Out.
We are to assume you sell the goods that have been in stock the longest.

Since we know you only have 160 units left, it will be the 160 units of your most recent purchase.

Ending Inventory = June 23 = 160 x 7 = $1,120

COGS:
How must did the other 840 units cost you?
June 1 = 200 x 5 = $1,000
June 12 = 300 x 6 = $1,800
June 23 = 340 x 7 = $2,380
Total COGS = $5,180


LIFO – Last in First Out
We are to assume you sell the goods that have been in stock the shortest.

Ending Inventory of 160 units = 160 x 5 = $800

COGS of 840 units:
June 23 = 500 x 7 = $3,500
June 12 = 300 x 6 = $1,800
June 1 = 40 x 5 = $200
Total COGS = $5,500


Summary
FIFO vs. LIFO

Ending Inventory
$1,120 vs. $800

COGS
$5,180 vs. $5,500

Quote:

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Originally Posted by sonyag1979

I am trying to compute ending inventory and cost of goods sold using FIFO AND LIFO, howver, I am not able to understand what to do or how to do it. Please help
units unit cost total cost
June 1 inv. 200 5 1000
12 purch 300 6 1800
23 puch 500 7 3500
30 inv. 160
I need to compute the cost of the ending inve. and the cost of goods sold under (a) FIFO & (b) LIFO, then tell which costing method gives the higher ending inventory and why? Which method rsults in the hgiher cost of goods sold and why?

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Wow, that explains it a whole lot better than what I learned in class. Thanks a lot!

You're welcome