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Jeters Company reports the following for the month of June. Date Explanation Units Unit Cost Total Cost June 1 Inventory 120 $5 $ 600 12 Purchase 370 6 2,220 23 Purchase 200 7 1,400 30 Inventory 230 Instructions (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average-cost. (Round average unit cost to three decimal places.) (b) Which costing method gives the highest ending inventory

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facundobuzzetti

Answer:

Instructions are listed below

Explanation:

Giving the following information:

June 1:

Inventory: 120 units for $5= $600

June 12:

Purchase: 370units for $6= $2,220

June 23:

Purchase: 200 units for $7= $1,400

June 30:

Ending Inventory 230 units

Units sold= 460

Under FIFO method, the first units-in are the first to go out. Therefore, the ending inventory has the value of the last units purchased.

Inventory= 200*7 + 30*6= $1,580

COGS= 120*5 + 340*6= $2,640

Under LIFO method, the lasts units-in are the first out.

Inventory= 120*5 + 110*6= $1,260

COGS= 260*6 + 200*7= $2,960

Under the average cost method, we calculate an average buying price and then calculate the ending inventory and cost of goods sold:

Average price= (5 +6 +7)/3= 6

Inventory= 230*6= $1,380

COGS= 460*6= $2,760

The highest ending inventory is from FIFO method.

abiolataiwo2015

a) Cost of goods sold under FIFO $2,740

Cost of goods sold under LIFO $2,960

Cost of goods sold under Average-cost $2,812

b) FIFO

a) Computation for  the cost of the ending inventory and the cost of goods sold

Date Units Unit cost Total cost

June 1 120 ×5=600

12   370×6 =2,220

23 200×7=1,400

Total 690  4220

Weighted-average unit cost=4220/690

Weighted-average unit cost=6.12

1.  Cost of goods sold under FIFO:

First step is to calculate the Cost of the ending inventory

Cost of the ending inventory=(200×7)+(230-200)×6

Cost of the ending inventory=$1400+$180

Cost of the ending inventory=$1,480

Now let calculate Cost of goods sold

Cost of goods sold=$4,220-$1,480

Cost of goods sold=$2,740

2. Cost of goods sold under LIFO:

First step  

Cost of the ending Inventory=(120*5)+(230-120)×6

Cost of the ending Inventory=$600+$660

Cost of the ending Inventory=$1,260

Now let determine Cost of goods sold

Cost of goods sold=$4,220-$1,260

Cost of goods sold=$2,960

3. Cost of goods sold under Average-cost:  

First step

Cost of the ending inventory=230×6.12

Cost of the ending inventory=$1,408

Now let determine the Cost of goods sold

Cost of goods sold=$4,220-$1,408

Cost of goods sold=$2,812

(b) The costing method that gives the highest ending inventory is FIFO.

Inconclusion a) Cost of goods sold under FIFO $2,740

Cost of goods sold un:der LIFO $2,960

Cost of goods sold under Average-cost $2,812

b) FIFO

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