PE 7-1A Cost flow methods

Three identical units of Item K113 are purchased during July, as shown below.

Item JC07 Units Cost
July 9 Purchase  1 $160
     17 Purchase  1 168
     26 Purchase  1 176
     Total  3 $504
     Average cost per unit $168 ($504 ÷ 3 units)

Assume that one unit is sold on July 31 for $225.
Determine the gross profit for July and ending inventory on July 31 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) average cost methods.

Answer:
                   Gross Profit   Ending Inventory  
                July   July 31  
a. First-in, first-out (FIFO) $65 ($225 – $160) $344 ($168 + $176)
b. Last-in, first-out (LIFO) $49 ($225 – $176) $328 ($160 + $168)
c. Average cost           $57 ($225 – $168) $336 ($168 × 2)

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