5 jones company started the year with no inventory. during the year, it purchased two identical inventory…
5 jones company started the year with no inventory. during the year, it purchased two identical inventory items at different times. the first purchase cost $1,290 and the other, $1,440. jones sold one of the items during the year. required: based on this information, how much product cost would be allocated to cost of goods sold and ending inventory on the year - end financial statements, assuming use of following cost flow assumptions: a. fifo? b. lifo? c. weighted average? references fifo lifo weighted average cost of goods sold ending inventory
Answer
Explanation:
Step1: Calculate weighted - average cost
The total cost of inventory = $1290 + 1440=2730$. There are 2 units in total. The weighted - average cost per unit = $\frac{2730}{2}=1365$.
Step2: Determine cost of goods sold and ending inventory under FIFO
Under FIFO (First - In, First - Out), the first item purchased is assumed to be sold first. So, cost of goods sold = $1290$, and ending inventory = $1440$.
Step3: Determine cost of goods sold and ending inventory under LIFO
Under LIFO (Last - In, First - Out), the last item purchased is assumed to be sold first. So, cost of goods sold = $1440$, and ending inventory = $1290$.
Step4: Determine cost of goods sold and ending inventory under weighted - average
Under weighted - average, cost of goods sold for 1 unit = $1365$, and ending inventory for 1 unit = $1365$.
Answer:
| FIFO | LIFO | Weighted Average | |
|---|---|---|---|
| Cost of goods sold | $1290$ | $1440$ | $1365$ |
| Ending inventory | $1440$ | $1290$ | $1365$ |