Problem 1: Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit. During the year, purchases were:
Feb. 20 600 units at $9 Aug. 12 300 units at $11
May 5 500 units at $10 Dec. 8 200 units at $12
Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.
Eddings Company uses a periodic inventory system. Sales totaled 1,500 units.
Instructions:
Cost of goods sold:
FIFO $13,600
LIFO $15,200
Average $14,475
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.
(c) Which cost flow method results in:
(1) the lowest inventory amount for the balance sheet, and
(2) the lowest cost of goods sold for the income statement?