M7-11 to 13 Calculating Cost of Goods Available for Sale, Cost of Goods Sold, and Ending Inventory under Periodic FIFO, LIFO, and Weighted Average Cost [LO 7-3] [The following information applies to the questions displayed below.] In its first month of operations, Literacy for the Illiterate opened a new bookstore and bought merchandise in the following order: (1) 300 units at $7 on January 1, (2) 450 units at $8 on January 8, and (3) 750 units at $9 on January 29. M7-11 Calculating Cost of Goods Available for Sale, Cost of Goods Sold, and Ending Inventory under Periodic FIFO [LO 7-3] Assuming 900 units are on hand at the end of the month, calculate the cost of goods available for sale, ending inventory, and cost of goods sold under FIFO. Assume a periodic inventory system is used. (Round "Cost per Unit" to 2 decimal places.)

As per the FIFO method, the first in first out approach is used for sale of books i.e what is purchased first is sold first and the subsequent purchases are sold on older inventory sold first basis.

In this case the purchases made during the month are detailed below :

Jan 1 300units*$7 = $2,100/-

Jan 8 450units*$8 = $3,600/-

Jan 29 750units*$9 = $6,750/-

Therefore total units purchased is 300+450+750 = 1,500 units. Of the purchases of 1,500 units, 900 units are on hand at the end of the month. So 1,500-900=600 units are sold and the FIFO method is used. Therefore the Jan 1 purchase is completely sold and out of the Jan 8 purchase, 300 units are sold and remaining units of the Jan 8 purchases is 150*$8=$1,200. The Jan 29 purchase is fully available. Hence cost of good available for sale is $1,200+$6,750=$7,950/-

Ending inventory in units is 150+750=900 units. Cost of goods sold is $2,100+(300units*$8) = $2,100+$2,400 = $4,500/-

marvineetesh3 marvineetesh3 · Answer 2 · 2025-03-27T10:40:26-04:00

The correct calculations of the above case are:

(1). Cost of goods available for sale = $7,950/-

(2). Ending Inventory = 900 units.

(3). Cost of goods Sold(COGS) = $4,500/-

What is the inventory?

Inventory is also called stock. It refers to the goods and materials that a corporation maintains for the highest end of resale, production or exercise.

Computation:

As per the FIFO(First in First Out) method. The company is used for the sale of books.

This means, what is bought first is sold first, and the succeeding purchases are sold on older inventory sold on the first basis.

In the above case, purchases are stated above:

Jan 1 :

[tex]300\text{Units}\times\$7 = \$2,100[/tex]

Jan 8 :

[tex]450\text{Units}\times \$8 = \$3,600[/tex]

Jan 29:

[tex]750\text{Units}\times \$9 = \$6,750[/tex]

Then, total units purchased:

[tex]300+450+750 = 1,500 \text{Units}.[/tex]

The purchases of 1,500 units, 900 units are on hand at the end of the month.

Units sold out and the FIFO method is:

[tex]1,500-900=600[/tex]

Therefore, the Jan 1 purchase is fully sold out. And of the Jan 8 purchase, 300 units are sold and the remaining units of the Jan 8 purchases are:

[tex]150\times \$8=\$1,200.[/tex]

Then, The Jan 29 purchase is fully free. Hence, the cost of goods available for sale is :

[tex]\$1,200+\$6,750=\$7,950[/tex]

Therefore, closing inventory in units is:

[tex]150+750=900 \text{Units}.[/tex]

Cost of goods sold is:

[tex]=\$2,100+(300\text{Units}\toimes \$8)\\\\= \$2,100+\$2,400\\\\ = \$4,500.[/tex]

Learn more about the inventory, refer to:

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