Unit 2-Challenge 4-Task 2
Task 2: Sophia is unsure of how to determine the cost of ending inventory and the cost of goods sold at the end of the year. You explain that one of three cost flow assumptions can be used to determine these amounts. Sophia provides you with the value of beginning inventory and a list of purchases made throughout the year.
During the month of February Year 3, HHEC.COM made the following purchases
Units Unit Cost Total Cost
Beginning Inventory, February 1 200 90 18,000
February 10 Purchase 300 100 30,000
February 21 Purchase 400 110 44,000
February 28 Purchase 100 120 12,000
Total 1,000 104,000
At the end of February, there were 870 units on hand. Determine (1) ending inventory; and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average cost).
Answer:
LIFO – Units Sold: 130
Cost of Goods Sold: Units Cost Total
Ending Inventory Units Cost
FIFO – Units Sold: 130
Cost of Goods Sold: Units Cost
Ending Inventory Units Cost
Average Cost – Units Sold: 130