Scrappers Supplies tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

 

Transactions	Units	Unit Cost
Beginning inventory, January 1	220	$ 26
Transactions during the year:	 	 
a. Purchase on account, March 2	310	28
b. Cash sale, April 1 ($42 each)	(370)	 
c. Purchase on account, June 30	270	32
d. Cash sale, August 1 ($42 each)	(90)	 
 

TIP: Although the purchases and sales are listed in chronological order, Scrappers determines the cost of goods sold after all of the purchases have occurred.
a. Compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold at December 31 using the LIFO method. (Round "Cost per Unit" anwers to 2 decimal places.)

To solve this problem, we will use the **LIFO (Last-In, First-Out)** inventory method to compute the following:

1. **Cost of Goods Available for Sale (COGAS)**
2. **Cost of Ending Inventory**
3. **Cost of Goods Sold (COGS)**

Here's the step-by-step approach:

### 1. **Calculate Cost of Goods Available for Sale (COGAS)**

First, calculate the total units and cost of all purchases made throughout the year, including the beginning inventory.

\[
\text{COGAS} = \text{Beginning Inventory} + \text{Purchases during the year}
\]

| Transaction           | Units  | Unit Cost | Total Cost  |
|-----------------------|--------|-----------|-------------|
| Beginning Inventory    | 220    | $26       | 220 × 26 = $5,720 |
| Purchase on March 2    | 310    | $28       | 310 × 28 = $8,680 |
| Purchase on June 30    | 270    | $32       | 270 × 32 = $8,640 |

\[
\text{Total Units} = 220 + 310 + 270 = 800 \text{ units}
\]
\[
\text{COGAS (Total Cost)} = 5,720 + 8,680 + 8,640 = \$23,040
\]

### 2. **Cost of Ending Inventory**

Using the LIFO method, we assume the **most recent purchases are sold first**. Therefore, the units remaining in the ending inventory come from the oldest purchases. 

**Total units sold:**

The number of units sold during the year is:
\[
\text{Units sold} = 370 \text{ (April 1)} + 90 \text{ (August 1)} = 460 \text{ units}
\]

**Units in ending inventory:**
\[
\text{Ending inventory units} = 800 \text{ (total units)} - 460 \text{ (units sold)} = 340 \text{ units}
\]

The ending inventory consists of the oldest units (starting with the beginning inventory and then any remaining units from the earlier purchases).

- 220 units from the **Beginning Inventory** at $26 each
- The remaining 120 units (340 - 220) from the **March 2 purchase** at $28 each

\[
\text{Ending Inventory Cost} = (220 \times 26) + (120 \times 28)
\]
\[
= 5,720 + 3,360 = \$9,080
\]

### 3. **Cost of Goods Sold (COGS)**

Now, we calculate the COGS by subtracting the ending inventory cost from the total cost of goods available for sale.

\[
\text{COGS} = \text{COGAS} - \text{Ending Inventory Cost}
\]
\[
\text{COGS} = 23,040 - 9,080 = \$13,960
\]

### Summary:

1. **Cost of Goods Available for Sale (COGAS):** $23,040
2. **Cost of Ending Inventory:** $9,080
3. **Cost of Goods Sold (COGS):** $13,960

Would you like a more detailed breakdown of any part? Let me know if you have any questions! 

Here are some related questions:

1. How would the results differ using the FIFO method?
2. What impact does the LIFO method have on taxes during periods of rising prices?
3. Can LIFO or FIFO methods affect the company's profitability ratios?
4. How would the valuation change if the company sold more units?
5. What if the unit costs were to fluctuate more throughout the year?

**Tip:** In times of inflation, LIFO typically results in higher COGS and lower ending inventory, reducing taxable income.

Scrappers Supplies tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions: 
Units	Unit Cost
Beginning inventory, January 1: 220 units at $26/unit
Transactions during the year:
- Purchase on account, March 2: 310 units at $28/unit
- Cash sale, April 1: 370 units sold at $42 each
- Purchase on account, June 30: 270 units at $32/unit
- Cash sale, August 1: 90 units sold at $42 each

Compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold at December 31 using the LIFO method.

Learn how to compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold using the LIFO method for Scrappers Supplies. This problem involves calculating inventory costs for 220 units at $26, 310 units at $28, and 270 units at $32, with detailed breakdowns. Suitable for college-level accounting students.

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