COST FLOW ASSUMPTIONS Theaverage cost methodassumes that items sold and items in ending inventory come from a mixture of all the goods available for sale. Thefirst-in, first-out (FIFO)method assumes that items sold are those that were acquired first.Ending inventory consists of the most recently acquired items. Thelast-in, first-out (LIFO)method assumes that items sold are those that were most recently acquired.Ending inventory consists of the items acquired first.
COST FLOW ASSUMPTIONS The Browning Company began 2020 with $22,000 of inventory.The cost of beginning inventory (BI) is composed of 4,000 units purchased for $5.50 each. Merchandise transactions during 2020 were as follows: Purchases Date of PurchaseUnitsUnit Cost*Total Cost Jan.171,000$6.00$6,000 Mar. 223,0007.0021,000 Oct.153,0007.5022,500 Totals7,000$49,500 *includes purchase price and cost of freight. Sales Date of SaleUnits Jan.102,000 Apr.151,500 Nov. 203,000 Total6,500 Illustration 8-5 Beginning inventoryCost of inventory ($22,000)\ on hand at end of period Cost of goodsavailable /? + ($71,500) Purchases \Cost of goods sold ($49,500)/during the period ? Total ending inventory plus cost of goods sold =$71,500 Graphic 8-4
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