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
May 5 500 units at $10
Aug. 12 300 units at $11
Dec. 8 200 units at $12
Eddings Company uses a periodic inventory system. Sales totaled 1,500 units.
1. Determine the cost of goods available for sale.?
2.Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost?
3.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?
a. Lowest inventory amount
b. Lowest cost of goods sold

1. To determine the cost of goods available for sale, we need to add up the beginning inventory and the purchases made throughout the year.

Beginning inventory:
400 units * $8.00 = $3,200

Purchases:
Feb. 20: 600 units * $9.00 = $5,400
May 5: 500 units * $10.00 = $5,000
Aug. 12: 300 units * $11.00 = $3,300
Dec. 8: 200 units * $12.00 = $2,400

Total purchases:
$5,400 + $5,000 + $3,300 + $2,400 = $16,100

Cost of goods available for sale:
$3,200 + $16,100 = $19,300

Therefore, the cost of goods available for sale is $19,300.

2. We will calculate the ending inventory and the cost of goods sold using three different cost flow methods: FIFO, LIFO, and average-cost.

a) FIFO (First-In, First-Out):

To calculate the ending inventory under FIFO, we assume that the units sold come from the earliest purchases and the remaining units are in the ending inventory.

Ending inventory:
400 units (beginning inventory)

Cost of goods sold:
1,500 units (total sales) - 400 units (ending inventory) = 1,100 units

Cost of goods sold:
400 units * $8.00 (cost per unit) = $3,200

b) LIFO (Last-In, First-Out):

To calculate the ending inventory under LIFO, we assume that the units sold come from the most recent purchases and the remaining units are in the ending inventory.

Ending inventory:
200 units (last purchase on Dec. 8)

Cost of goods sold:
1,500 units (total sales) - 200 units (ending inventory) = 1,300 units

Cost of goods sold:
1,300 units * $12.00 (cost per unit) = $15,600

c) Average-Cost:

To calculate the ending inventory and the cost of goods sold under the average-cost method, we need to determine the weighted average cost per unit.

Total units purchased:
600 units + 500 units + 300 units + 200 units = 1,600 units

Total cost of purchases:
$5,400 + $5,000 + $3,300 + $2,400 = $16,100

Weighted average cost per unit:
$16,100 (total cost) / 1,600 units = $10.06 per unit (rounded to two decimal places)

Ending inventory:
400 units (beginning inventory)

Cost of goods sold:
1,500 units (total sales) - 400 units (ending inventory) = 1,100 units

Cost of goods sold:
1,100 units * $10.06 (average cost per unit) = $11,066

Therefore, the ending inventory and the cost of goods sold under each cost flow method are:

FIFO:
Ending inventory = 400 units
Cost of goods sold = $3,200

LIFO:
Ending inventory = 200 units
Cost of goods sold = $15,600

Average-cost:
Ending inventory = 400 units
Cost of goods sold = $11,066

3. To determine which cost flow method results in the lowest inventory amount for the balance sheet and the lowest cost of goods sold for the income statement, we compare the results from the previous step.

a) Lowest inventory amount: LIFO method provides the lowest inventory amount because it assumes that the most recent purchases are sold first, leaving the oldest purchases in the ending inventory.

b) Lowest cost of goods sold: FIFO method provides the lowest cost of goods sold because it assumes that the oldest purchases are sold first, resulting in lower costs being recognized in the income statement.

Therefore:
a) Lowest inventory amount: LIFO
b) Lowest cost of goods sold: FIFO

1. To determine the cost of goods available for sale, you need to add the beginning inventory to the total purchases made throughout the year.

Beginning inventory: 400 units at $8 per unit
Total purchases:
- Feb. 20: 600 units at $9 per unit
- May 5: 500 units at $10 per unit
- Aug. 12: 300 units at $11 per unit
- Dec. 8: 200 units at $12 per unit

To calculate the total cost of goods available for sale, multiply the quantity of each purchase by its respective unit cost and then sum them up:

Total cost of goods available for sale = (400 * $8) + (600 * $9) + (500 * $10) + (300 * $11) + (200 * $12)

2. Now let's determine the ending inventory and the cost of goods sold for each cost flow method (FIFO, LIFO, and average-cost):

a. FIFO (First-In, First-Out) method assumes that the earliest acquired inventory is sold first. To determine the ending inventory, start with the most recent purchase and deduct the units sold from each purchase until the remaining units reach zero. The cost of goods sold is calculated as the cost of the units sold during the year.

Ending inventory (FIFO): The remaining units after deducting sold units from the most recent purchase.
Cost of goods sold (FIFO): The cost of the units sold during the year.

b. LIFO (Last-In, First-Out) method assumes that the most recently acquired inventory is sold first. To determine the ending inventory, start with the earliest purchase and deduct the units sold from each purchase until the remaining units reach zero. The cost of goods sold is calculated as the cost of the units sold during the year.

Ending inventory (LIFO): The remaining units after deducting sold units from the earliest purchase.
Cost of goods sold (LIFO): The cost of the units sold during the year.

c. Average-cost method assigns a weighted average cost to each unit of inventory. To determine the ending inventory, multiply the weighted average cost by the remaining units after deducting sold units. The cost of goods sold is calculated as the total cost of goods available for sale minus the ending inventory.

Ending inventory (Average-cost): Remaining units * weighted average cost per unit
Cost of goods sold (Average-cost): Total cost of goods available for sale - ending inventory (average-cost)

3. To determine which cost flow method results in the lowest inventory amount for the balance sheet and the lowest cost of goods sold for the income statement:

a. For the lowest inventory amount, you would want to choose the cost flow method that values your ending inventory at the lowest cost. In this case, LIFO tends to result in a lower inventory amount.

b. For the lowest cost of goods sold, you would want to choose the cost flow method that calculates the cost of goods sold at the lowest cost. In this case, FIFO tends to result in a lower cost of goods sold.