PROBLEM 8-5 (a) Assuming costs are not computed for each withdrawal (units received, 5,700, minus units issued, 4,700, equals ending inventory at 1,000 units): 1. 2. 3. First-in, first-out. Date of Invoice Jan. 28 No. Units 1,000 Unit Cost $3.50 Total Cost $3,500 Last-in, first-out. Date of Invoice Jan. 2 No. Units 1,000 Unit Cost $3.00 Total Cost $3,000 Unit Cost $3.00 3.20 3.30 3.40 3.50 Total Cost $ 3,600 1,920 3,300 4,420 5,600 $18,840 Average-cost. Cost of goods available: Date of Invoice No. Units Jan. 2 1,200 Jan. 10 600 Jan. 18 1,000 Jan. 23 1,300 Jan. 28 1,600 Total Available 5,700 Average cost per unit = $18,840 ÷ 5,700 = $3.31 Cost of inventory Jan. 31 = 1,000 X $3.31 = $3,310 (b) Assuming costs are computed at the time of each withdrawal: Under FIFO—Yes. The amount shown as ending inventory would be the same as in (a) above. In each case the units on hand would be assumed to be part of those purchased on Jan. 28. Under LIFO—No. During the month the available balance dropped below the ending inventory quantity so that the layers of oldest costs were partially liquidated during the month. 8-46 PROBLEM 8-5 (Continued) Under Average-Cost—No. A new average cost would be computed each time a withdrawal was made instead of only once for all items purchased during the year. The calculations to determine the inventory on this basis are given below. 1. First-in, first-out. The inventory would be the same in amount as in part (a), $3,500. 2. Last-in, first-out. Received Date Jan. 2 No. of units Unit cost 1,200 $3.00 600 3.20 Jan. 7 Jan. 10 Issued No. of units 700 Balance Unit cost $3.00 No. of units 500 3.20 $3.00 $3,600 500 3.00 1,500 500 3.00 500 100 Jan. 18 1,000 3.30 Jan. 20 Jan. 23 300 700 1,300 3.30 500 3.20 300 3.00 3.20 700 3.30 200 3.40 200 500 Jan. 31 1,600 3.50 200 1,300 3.20 3,420 1,820 3.00 1,300 Jan. 28 3.00 100 200 800 3.20 4,130 3.30 100 3.40 Jan. 26 Amount 1,200 600 Jan. 13 Unit cost* 3.50 3.00 3.00 3.40 3.00 3.40 5,020 2,300 3.00 500 3.40 1,600 3.50 200 600 7,900 3.00 500 3.40 300 3.50 3,350 Inventory, January 31 is $3,350. 8-47 PROBLEM 8-5 (Continued) 3. Average-cost. Received Date Jan. 2 No. of units Unit cost 1,200 $3.00 600 3.20 Jan. 7 Jan. 10 700 Jan. 13 Jan. 18 500 1,000 3.30 Jan. 20 Jan. 23 Jan. 31 300 1,100 1,300 3.40 1,600 3.50 Jan. 26 Jan. 28 Issued No. of units 800 1,300 Balance Unit cost $3.0000 3.1091 3.2281 3.2281 3.3773 3.4626 No. of units Unit cost* $3.0000 $3,600 1,500 500 3.0000 1,100 3.1091 3,420 600 3.1091 1,865 1,300 3.2281 4,197 200 3.2281 646 1,500 3.3773 5,066 2,364 700 3.3773 2,300 3.4626 7,964 1,000 3.4626 3,463 Inventory, January 31 is $3,463. *Four decimal places are used to minimize rounding errors. LO: 3, Bloom: AP Complex, Time: 40-55, AACSB: Analysis , AICPA BB: None Measurement, Reporting, AICPA PC:, AICPA BB: None 8-48 Amount 1,200