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Classic distribution markets CD's of numerous performing artists. At the beginning of March, Classic had in beginning inventory 1,500 CD's with a unit cost of $7. During March, Classic made the following purchases of CD's
March 5 2,000 @ $8
March 13 5,500 @ $9
March 21 6000 @ $10
March 26 2000 @ $11
During March 13,000 units were sold. Classic uses a periodic inventory system

A) Determine the cost of goods available for sale.

B) Determine 1) The ending inventory and 2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average cost). Prove the accuracy of the costs of goods sold under the FIFO and LIFO methods. (Note: for average cost round cost per unit per three decimal places)

C) Which cost flow method results in 1) the highest inventory amount for the balance sheet and 2) the highest cost of goods sold for the income statement?

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Solution Summary

This solution explains how to determine the cost of goods, ending inventory, and which cost flow method results in the highest inventory amount and highest cost of goods sold.

Solution Preview

Date Units Cost
01-Mar 1500 $7.00
05-Mar 2000 $8.00
13-Mar 5500 $9.00
21-Mar 6000 $10.00
26-Mar 2000 $11.00 ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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