Kirtland Corporation uses a periodic inventory system. At the end of the annual accounting period, December 31, the accounting records for the most popular item in inventory showed the following:

Kirtland Corporation uses a periodic inventory system. At the end of the annual accounting period, December 31, the accounting records for the most popular item in inventory showed the following:

	Transactions	Units	Unit Cost
Beginning inventory, January 1		480	$3.00
Transactions during the year:
a.	Purchase, January 30	380	4.20
b.	Purchase, May 1	540	4.00
c.	Sale ($5 each)	(240)
d.	Sale ($5 each)	(780)

 

Required:

a. Compute the amount of goods available for sale.

Explanation:

a.

Goods available for sale for all methods:

	Units	Unit Cost		Total Cost
January 1, Beginning inventory	480	$	3.00	$	1,440
January 30, Purchase	380		4.20		1,596
May 1, Purchase	540		4.00		2,160
Goods available for sale	1,400			$	5,196

Ending inventory: 1,400 units – (240 + 780) = 380 units

b. & c.
 

Average cost:

Average unit cost	$5,196 ÷ 1,400 = $3.71
Ending inventory	(380 units × $3.71)	$	1,410.34
Cost of goods sold1	($5,196 – $1,410.34)	$	3,785.66

  
¹Direct computation of Cost of goods sold: (1,020 units × $3.71) = $3,785.66

First-in, first-out:

Ending inventory	(380 units × $4.00)	$	1,520
Cost of goods sold2	($5,196 – $1,520)	$	3,676

   
²Direct computation of Cost of goods sold: [(480 units @ $3.00) + (380 units @ $4.20) + (160 units @ $4.00)] = $3,676

Last-in, first-out:

Ending inventory	(380 units × $3.00)	$	1,140
Cost of goods sold3	($5,196 – $1,140)	$	4,056

³Direct computation of Cost of goods sold: [(100 units @ $3.00) + (380 units @ $4.20) + (540 units @ $4.00)] = $4,056
 

Specific identification:

Ending inventory	(0 units × $3.00) +
	(236 units × $4.20) +
	(144 units × $4.00)	$	1,567.20
Cost of goods sold4	($5,196 – $1,567.20)	$	3,628.80

⁴Direct computation of Cost of goods sold: [(480 units @ $3.00) + (144 units @ $4.20) + (396 units @ $4.00)] = $3,628.80

here