Pearl Company uses the periodic inventory system to account for inventories. Information related to Pearl Company's inventory at October 31 is given below: October 1 Beginning inventory 400 units @ $ 9.60 = $ 3 , 840 8 Purchase 800 units @ $ 10.40 = 8 , 320 16 Purchase 600 units @ $ 10.80 = 6 , 480 24 Purchase 200 units @ $ 11.80 = 2 , 360 ‾ Total units and cost 2 , 000 units $ 21 , 000 \begin{array}{rllrl} ext { October } 1 & ext { Beginning inventory } & 400 ext { units } @ \$ 9.60= & \$ 3,840 \8 & ext { Purchase } & 800 ext { units } @ \$ 10.40= & 8,320 \16 & ext { Purchase } & 600 ext { units } @ \$ 10.80= & 6,480 \24 & ext { Purchase } & 200 ext { units } @ \$ 11.80= & \underline{2,360} \ & ext { Total units and cost } & 2,000 ext { units } & \$ 21,000\end{array} October 1 8 16 24 Beginning inventory Purchase Purchase Purchase Total units and cost 400 units @$9.60 = 800 units @$10.40 = 600 units @$10.80 = 200 units @$11.80 = 2 , 000 units $3 , 840 8 , 320 6 , 480 2 , 360 $21 , 000 Instructions1. Show computations to value the ending inventory using the FIFO cost assumption if 600 units remain on hand at October 31.2. Show computations to value the ending inventory using the weighted-average cost method if 600 units remain on hand at October 31.3. Show computations to value the ending inventory using the LIFO cost assumption if 600 units remain on hand at October 31.

Question

Pearl Company uses the periodic inventory system to account for inventories. Information related to Pearl Company's inventory at October 31 is given below:    October  1  Beginning inventory  400  units  @ $ 9.60 = $ 3 , 840 8  Purchase  800  units  @ $ 10.40 = 8 , 320 16  Purchase  600  units  @ $ 10.80 = 6 , 480 24  Purchase  200  units  @ $ 11.80 = 2 , 360 ‾  Total units and cost  2 , 000  units  $ 21 , 000 \begin{array}{rllrl}	ext { October } 1  &  	ext { Beginning inventory }  &  400 	ext { units } @ \$ 9.60=  &  \$ 3,840 \8  &  	ext { Purchase }  &  800 	ext { units } @ \$ 10.40=  &  8,320 \16  &  	ext { Purchase }  &  600 	ext { units } @ \$ 10.80=  &  6,480 \24  &  	ext { Purchase }  &  200  	ext { units } @ \$ 11.80=  &  \underline{2,360} \ &  	ext { Total units and cost }  &  2,000  	ext { units }  &  \$ 21,000\end{array}  October  1 8 16 24 ​  Beginning inventory   Purchase   Purchase   Purchase   Total units and cost  ​ 400  units  @$9.60 = 800  units  @$10.40 = 600  units  @$10.80 = 200  units  @$11.80 = 2 , 000  units  ​ $3 , 840 8 , 320 6 , 480 2 , 360 ​ $21 , 000 ​ Instructions1. Show computations to value the ending inventory using the FIFO cost assumption if 600 units remain on hand at October 31.2. Show computations to value the ending inventory using the weighted-average cost method if 600 units remain on hand at October 31.3. Show computations to value the ending inventory using the LIFO cost assumption if 600 units remain on hand at October 31.

Faisal Alsaad · Accepted Answer

Final Answer :

1. 600 units in ending inventory.
Under FIFO, the units remaining in inventory are the ones purchased most recently.

24\quad200

units

\$ 11.80 = \$ 2,360

16\quad\underline { 400 } \text{units} \quad \quad @10.80 = \underline{ 4,320 }

\quad\quad\quad\quad\underline { 600 }

units

$6,680‾\quad\quad\quad\quad\quad\quad\underline{ \$ 6,680 }

2. 600 units in ending inventory.
Under average cost method the weighted average cost per unit must be computed.
$21000 ÷ 2000 units = $10.50
600 units × $10.50 = $6300 3.

\quad

600 units in ending inventory.

\quad

\quad

Under LIFO, the units remaining are the ones purchased earliest.

\quad

\quad

@10.40=2,080‾600‾units$5,920‾\begin{array} { l l l } 10 / 1 & 400 \text { units } @ \$ 9.60 = \$3,840\\ 10 / 8 & \underline { 200 } \text { units }@\quad 10.40 = \underline { 2,080 }\\&\underline{600}\text{units}\quad \quad \quad \quad \quad \quad \underline{\$5,920} \end{array}

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