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20 December, 13:01

The units of an item available for sale during the year were as follows: Jan. 1 Inventory 20 units at $360 $ 7,200 Aug. 13 Purchase 260 units at $342 88,920 Nov. 30 Purchase 40 units at $357 14,280 Available for sale 320 units $110,400 There are 57 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost using (a) the first-in, first-out (FIFO) method; (b) the last-in, first-out (LIFO) method; and (c) the weighted average cost method.

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  1. 20 December, 15:20
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    The computation of the ending inventory using the each method is shown below:

    a. FIFO

    Since the 57 units is in physical inventory so 40 units should be taken at $357 i. e from latest purchase and the remaining 17 units is at $342

    = 40 units * $357 + 17 units * $342

    = $20,094

    b. LIFO

    Since the 57 units is in physical inventory so 20 units should be taken at $360 and the rest 37 units at $342

    = 20 units * $360 + 37 units * $342

    = $19,854

    c. Weighted average cost method

    = Weighted average cost per unit * ending inventory units

    where,

    Weighted average cost per unit is

    = $110,400 : 320 units

    = $345

    And, the ending inventory units is 57 units

    So, the ending inventory is

    = 57 units $345

    = $19,665
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