Ming Co. started the year with no inventory. During the year, it purchased two i
ID: 2424973 • Letter: M
Question
Ming Co. started the year with no inventory. During the year, it purchased two identical inventory items. The inventory was purchased at different times. The first purchase cost $2,400 and the other, $3,000. One of the items was sold during the year.
Based on this information, how much product cost would be allocated to cost of goods sold and ending inventory on the year-end financial statements, assuming use of FIFO, LIFO, and Weighted average. (Omit the "$" sign in your response.)
Ming Co. started the year with no inventory. During the year, it purchased two identical inventory items. The inventory was purchased at different times. The first purchase cost $2,400 and the other, $3,000. One of the items was sold during the year.
Explanation / Answer
FIRST IN FIRST OUT METHOD
1) COST OF GOODS : $2400+$3000 = $7400 (The first purchase cost $2,400 and the other, $3,000.)
COST OF GOODS SOLD:$2400 ( IN FIFO METHOD THE FIRST ITEM IS SOLD FIRST)
ENDING INVENTORY: $3000 ( SECOND TIME PURCHASED ITEM AS REMAINED AS ENDING INVENTORY IN FIFO METHOD)
2)LAST IN FIRST OUT METHOD
COST OF GOODS : $2400+$3000 = $7400 (The first purchase cost $2,400 and the other, $3,000.)
COST OF GOODS SOLD:$3000 ( IN LIFO METHOD THE SECOND ITEM IS SOLD FIRST)
ENDING INVENTORY: $3000 ( FIRST TIME PURCHASED ITEM AS REMAINED AS ENDING INVENTORY IN FIFO METHOD)
3)Weighted average method
COST OF GOODS : $2400+$3000 = $7400 (The first purchase cost $2,400 and the other, $3,000.)
COST OF SINGLE GOOD: ($2400+$3000)/2=$7400/2=$3700
COST OF GOODS SOLD:$3700 ( IN WEIGHTED AVERAGE METHOD THE ITEM IS VALUED AT WEIGHTED AVERAGE COST IRRESPECTIVE OF ITS ORIGINAL COST)
ENDING INVENTORY: $3700 ( REMAINED INVENTORY IS VALUED AT WEIGHTED AVERAGE COST IRRESPECTIVE OF ITS ORIGINAL COST )