Between January and March Uncle Joe had the following transactions:
| January 1 | Beginning inventory (mugs)– 50 units at $10 per unit |
| February 1 | Purchased 50 units at $9 per unit |
| March 1 | Sold 60 units |
If Uncle Joe sells each mug for $20. What is the ending inventory using FIFO, LIFO and weighted average?
FIFO
1st) Compute the cost of goods available for sale
Cost of goods available for sale = Beginning Inventory + purchases
| Description | Beginning Inventory | Purchases | Cost of goods available for sale |
| January 1 -purchase | 50 units @ $10 = 500 | 50 units @ $ 10 = 500 | |
| February 1 -purchase | 50 units @ $10 = 500 | 50 units @ $9 = $450 | 500+450=950 |
2nd) Compute the cost of goods sold ( the cost of sales)
| Description | Cost of goods available for sale | Cost of goods sold |
| March 1: Sold 60 units | 50 units @ $10 = 500,50 units @ $9 = 450 | Beginning inventory:50 units @ $10 = $500,
First purchase: 10 units @ $9 = $90, Cost of goods sold (FIFO)= $590 |
3rd) Compute the ending inventory
| Description | Beginning Inventory + Purchases | Cost of goods sold | Ending Inventory |
| March 1: Ending Inv | 50 units @ $10 = 500,50 units @ $9 = 450 | $590 (as shown above) | 40 units at $9 = $360 |
LIFO
1st) Compute the cost of goods available for sale
Cost of goods available for sale = Beginning Inventory + purchases
| Description | Beginning Inventory | Purchases | Cost of goods available for sale |
| January 1 -purchase | 50 units @ $10 = 500 | 50 units @ $ 10 = 500 | |
| February 1 -purchase | 50 units @ $10 = 500 | 50 units @ $9 = $450 | 50 units @ $10 = 500,50 units @ 9 = 450 |
2nd) Compute the cost of goods sold ( the cost of sales)
| Description | Cost of goods available for sale | Cost of goods sold |
| March 1: Sold 60 units | 50 units @ $10 = 500,50 units @ $9 = 450 | First purchase 50 units @ $9 = $450,
Beginning Inventory: 10 units @ $10 = $100, Cost of goods sold (LIFO)= $550 |
Compute the ending inventory
| Description | Beginning Inventory + Purchases | Cost of goods sold | Ending Inventory |
| March 1: Ending Inv | 50 units @ $10 = 500,50 units @ $9 = 450 | $550(as shown above) | 40 units at $10 = $400 |
Weighted Average
1st) Compute the cost of goods available for sale
Cost of goods available for sale = Beginning Inventory + purchases
| Description | Beginning Inventory | Purchases | Cost of goods available for sale |
| January 1 -purchase | 50 units @ $10 = 500 | 50 units @ $ 10 = 500 | |
| February 1 -purchase | 50 units @ $10 = 500 | 50 units @ $9 = $450 | Cost of goods available for sale/ total units available for sale = 950/100 = $9.50 |
2nd) Compute the cost of goods sold ( the cost of sales)
| Description | Cost of goods available for sale | Cost of goods sold |
| March 1: Sold 60 units | 100 @ $9.50 | 60 * $9.50 = $570 |
3rd) Compute the ending inventory
| Description | Beginning Inventory | Cost of goods sold | Ending Inventory |
| March 1: Ending Inv | 100 units @ 9.50 = 950 | 60 units @ $9.50 = 570 | 40 units at $9.50 = $380 |