I NEED HELP; I'M LOST
Trader sells 15 units for $25 each on December 15. Eight of the sold units are from the December 7
purchase and seven are from the December 14 purchase. Trader uses a perpetual inventory system.
Determine the costs assigned to the December 31 ending inventory when costs are assigned based on
(a) FIFO, (b) LIFO, (c) weighted average, and (d ) specific identification.
If you were trying to cut and paste with (a) etc., sorry, but it does not work here. You will need to type everything out. Then, go away from Jiskha, coming back to be sure everything you wanted to post, did post.
Sra
To determine the costs assigned to the December 31 ending inventory using different cost assignment methods, let's go through each method one by one:
(a) FIFO (First-In-First-Out):
FIFO assumes that the first units purchased are the first ones sold. According to the information provided, eight units were sold from the December 7 purchase, while seven units were sold from the December 14 purchase. Therefore, the remaining units in the inventory are assumed to be from the most recent purchase, which is the December 14 purchase. To calculate the costs assigned, we need to know the cost of units from each purchase.
Let's assume the cost of the December 7 purchase is $10 per unit, and the cost of the December 14 purchase is $12 per unit. Since the eight units sold are from the December 7 purchase, the cost assigned to the December 31 ending inventory under FIFO would be 7 units multiplied by $12 per unit.
Cost assigned under FIFO: 7 units × $12 per unit = $84.
(b) LIFO (Last-In-First-Out):
LIFO assumes that the last units purchased are the first ones sold. Based on the information provided, eight units were sold from the December 7 purchase, and seven units were sold from the December 14 purchase. To calculate the costs assigned under LIFO, we also need to know the cost of units from each purchase.
Using the same cost assumptions as before, the cost assigned to the December 31 ending inventory under LIFO would be the remaining eight units from the December 7 purchase multiplied by $10 per unit.
Cost assigned under LIFO: 8 units × $10 per unit = $80.
(c) Weighted Average:
The weighted average method calculates the average cost of all units purchased and assigns that average cost to the ending inventory. To determine the cost assigned under weighted average, we need to calculate the total cost of all units purchased and then divide it by the total number of units.
Assuming the total cost of the December 7 purchase was $80 ($10 per unit × 8 units) and the total cost of the December 14 purchase was $84 ($12 per unit × 7 units), the total cost of all units purchased would be $164. Since there are 15 units in total, the weighted average cost per unit would be $164 divided by 15.
Cost assigned under weighted average: $164 divided by 15 units = $10.93 (rounded to two decimal places).
(d) Specific Identification:
The specific identification method assigns the actual cost of each individual unit from the purchases to the ending inventory. This method requires tracking the cost of each unit separately, which may not be feasible in all situations. However, if you know the specific cost of each unit, you can assign the costs accordingly.
In this case, if you have the cost information for each individual unit, you would assign the cost of the remaining units in the ending inventory based on their actual purchase cost.
Please note that the cost assumptions used in the examples above are only for illustrative purposes. The actual costs would depend on the specific unit costs provided.
I hope this clarifies how to determine the costs assigned to the December 31 ending inventory using FIFO, LIFO, weighted average, and specific identification methods.