Montoure Company uses a periodic inventory system. It entered into the following calendar-year...

Question:

Montoure Company uses a periodic inventory system. It entered into the following calendar-year 2015 purchases and sales transactions.

Date Activities Units Acquired at Cost Units Sold at Retail
Jan.1-Beginning inventory690units@ $80.00 per unit
Feb.10-Purchase445units@ $77.00 per unit
Mar.13-Purchase245units@ $62.00 per unit
Mar.15-Sales 845units@ $110.00 per unit
Aug.21-Purchase190units@ $85.00 per unit
Sept.5-Purchase590units@ $81.00 per unit
Sept.10-Sales 780units@ $110.00 per unit
Totals2,160units1,625units

1. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification units sold consist of 690 units from beginning inventory, 255 from the February 10 purchase, 245 from the March 13 purchase, 95 from the August 21 purchase, and 340 from the September 5 purchase.

2. Compute gross profit earned by the company for each of the four costing methods.

Inventory Valuation Methods:

Inventory valuation methods are used to account for the cost of an inventory. Under First-in, first-out (FIFO) method, the units sold are taken from the earliest inventory purchased. This is opposite to Last-in, First-out (LIFO) method where the units sold is taken from the latest inventory purchased.

Answer and Explanation: 1

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Question 1: Let us compute the ending inventory in units. We subtract the units sold from the beginning inventory and add the units purchases.

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Inventory Valuation Methods: Specific Identification, FIFO, LIFO & Weighted Average

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Chapter 6 / Lesson 11
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Inventory valuation methods are ways that companies place a monetary value on the items they have in their inventory. Discover different inventory valuation methods, including specific identification, First-In-First-Out (FIFO), Last-In-First-Out (LIFO), and weighted average.


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