Question 1 (Periodic inventory system)
Horan Ltd has the following inventory transactions for the month of December 2016. All inventory items are identical.
During the month of December, the following inventory transactions took place in the Horan:
Opening inventory recorded 1 December 2016; 1000 units @$10
Purchases on 1 December 2016; 3000 units @$12
Purchases on 12 December 2016; 4000 units @$14
Purchases on 21 December 2016; 2000 units @$15
Horan Ltd sells 8000 units during the month and has 2000 units on hand at the month end. At the month end, the net realisable value of the inventory item is $20 per unit.
Required:
Compute the costs of sales and ending inventory following the periodic system to record inventory the under each of the following cost flow methods.:
a) First in, First out (FIFO) method
b) Weighted average cost method
c) Last in, First out (LIFO) method
Question 2 (Perpetual inventory system)
Chemist Laboratories Ltd purchases from suppliers and sells to retailers a brand of cosmetic in the month of December 2017. All cosmetic items are identical. During the month of December 2017, the following inventory transactions took place in the Chemist Laboratories Ltd:
Opening inventory recorded on 1 December 2017; 10 units @$22
Purchased on 1 December 2017; 20 units @$20
Sold 5 units on 10 December 2017
Sold 16 units on 12 December 2017
Purchased on 15 December 2017; 15 units @$18
Sold 12 units on 21 December 2017
Purchased on 25 December 2017; 10 units @$21
Chemist Laboratories Ltd purchased 45 units, sold 33 units and has 22 units on stock at the end of December. The company uses the perpetual inventory costs flow system to record the inventory.
Required:
Compute the costs of sales and ending inventory under the following cost flow methods:
a) First in, First out (FIFO) method
b) Weighted average cost method
c) Last in, First out (LIFO) method
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