Inventory Cost Flow Methods and Valuation Techniques: A Comprehensive Analysis

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Inventory Cost Flow Methods and Valuation Techniques: A Comprehensive AnalysisE8-13, E8-14, E8-18, P8-5, E9-19, E9-21, and P9-1.E 8–13-Altira Corporation-Inventory cost flow methods; periodic system●LO1 LO4Altira Corporation uses a periodic inventory system. The following information related to itsmerchandise inventory during the month of August 2011 is available:Required:Determine the inventory balance Altira would report in its August 31, 2011, balance sheet and the costof goods sold it would report in its August 2011 income statement using each of the following cost flowmethods: 1. First-in, first-out (FIFO) 2. Last-in, first-out (LIFO) 3. Average costExercise 8-13Cost of goods available for sale:Beginning inventory(2,000 x $6.10)$12,200Purchases:10,000 x $5.50$55,0006,000 x $5.0030,00085,000Cost of goods available(18,000 units)$97,200First-in, first-out (FIFO)Cost of goods available for sale(18,000 units)$97,200Less: Ending inventory(determined below)(15,000)Cost of goods sold$82,200Cost of ending inventory:

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Date ofpurchaseUnitsUnit costTotal costAugust 183,000$5.00$15,000Last-in, first-out (LIFO)Cost of goods available for sale(18,000 units)$97,200Less: Ending inventory(determined below)(17,700)Cost of goods sold$79,500Cost of ending inventory:Date ofpurchaseUnitsUnit costTotal costBeg. Inv.2,000$6.10$12,200August 81,0005.505,500Total$17,700Average costCost of goods available for sale(18,000 units)$97,200Less: Ending inventory(determined below)(16,200)Cost of goods sold$81,000*Cost of ending inventory:$97,200

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Weighted-average unit cost== $5.4018,000 units3,000 units x $5.40 = $16,200*Alternatively, could be determined by multiplying the units sold by the averagecost:15,000 units x $5.40 = $81,000E 8–14-Altira Corporation-Inventory cost flow methods; perpetual system●LO1 LO4[This is a variation of Exercise 8–13 modified to focus on the perpetual inventory system and alternativecost flow methods.]Altira Corporation uses a perpetual inventory system. The following transactions affected itsmerchandise inventory during the month of August 2011:Required:Determine the inventory balance Altira would report in its August 31, 2011, balance sheet and the costof goods sold it would report in its August 2011 income statement using each of the following cost flowmethods: 1. First-in ,first-out (FIFO) 2. Last-in, first-out (LIFO) 3. Average costExercise 8-14First-in, first-out (FIFO)Cost of goods sold:Date ofCost ofsaleUnits soldUnits SoldTotal CostAug. 142,000(from Beg. Inv.)$6.10$12,2006,000(from 8/8 purchase)5.5033,000Aug. 254,000(from 8/8 purchase)5.5022,000

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3,000(from 8/18 purchase)5.0015,000Total15,000$82,200Ending inventory= 3,000 units x $5.00 =$15,000Last-in, first-out (LIFO)DatePurchasedSoldBalanceBeginninginventory2,000 @ $6.10=$12,2002,000 @ $6.10$12,200August 810,000 @ $5.50 =$55,0002,000 @ $6.1010,000 @ $5.50$67,200August 148,000 @ $ 5.50 =$44,0002,000 @ $6.102,000 @ $5.50$23,200August 186,000 @ $5.00=$30,0002,000 @ $6.102,000 @ $5.50$53,2006,000 @ $5.00

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