Inventory Flow Assumptions
Arrow, Inc

question 75

Essay

Inventory flow assumptions
Arrow, Inc. uses a perpetual inventory system. On January 22, 2010, the company had 200 units of a particular product on hand, with a total cost of $2,400. The per-unit costs were:
On January 24, 2010, Arrow sold 65 units of this product.
Using the three flow assumptions listed below, compute (1) the cost of goods sold, and (2) the cost of the inventory of this product on hand after this sale. Show your computations.
$\begin{array}{|l|r|r|r|}\hline\text { Date }& \text { Purchase } & \text { Unit } & \text { Total } \\&\text { Quantity } & \text { Cost } & \text { Cost } \\ \hline \text { Ending inventory, } 2009 & 50 & \$ 9 & \$ 450 \\\hline \text { Jan } 10 \text { purchase } & 150 & \$ 13 & \underline{1}, 950 \\\hline \text { Total on hand } & 200 & & \$ 2,400 \\\hline\end{array}$ $$\begin{array} { | l | l | l | l| } \hline \text { (a) } & { \text { Average cost: } } & \\\hline & ( 1 ) & \text { Cost of goods sold } & \$\underline{\quad\quad} \\\hline & ( 2 ) & \text { Inventory remaining after sale } & \$ \underline{\quad\quad}\\\hline \text { (b) } & \text { LIFO: } & & \\& \text { (1) } & \text { Cost of goods sold } & \$ \underline{\quad\quad}\\\hline & ( 2 ) & \text { Inventory remaining after sale } & \$ \underline{\quad\quad}\\\hline \text { (c) } & \text { FIFO: } & & \\& \text { (1) } & \text { Cost of goods sold } & \$ \underline{\quad\quad}\\\hline & ( 2 ) & \text { Inventory remaining after sale } & \$\underline{\quad\quad} \\ \hline\end{array}$$

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Definitions:

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