In this module, you will learn how to compute costs using four inventory costing methods. Specific identification assigns costs to ending inventory and cost of goods sold by tracking and identifying each specific item of inventory. Under FIFO, the costs first in are assigned to cost of goods sold, and the costs last in (most recent) are assigned to the inventory that is still on hand in ending inventory. Under LIFO, the costs last in are assigned to cost of goods sold, and the costs first in (oldest) are assigned to the inventory that is still on hand in ending inventory. Under weighted average cost, the weighted average cost per unit of inventory is assigned equally to goods sold and those still on hand in ending inventory.

Knowledge Check 01

Cable Knit, Inc. reported cost of goods sold of $3,800 for the current year. Its beginning inventory was $3,900 and its ending inventory was $1,400. What was the amount of purchases made during the year?