Question

Gladstone Company 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			1,500		$	60
Transactions during the year:
a.	Purchase, January 30		2,600			72
b.	Sale, March 14 ($100 each)		(1,150	)
c.	Purchase, May 1		1,300			90
d.	Sale, August 31 ($100 each)		(1,600	)

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required:

1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

Ending Inventory Amount of Goods Available for Sale $ 394,200 Cost of Goods Sold a. Last-in, first-out b. Weighted average cost c. First-in, first-out d. Specific identification

Answer 1

Calculation of Cost of goods available for sale

Date		Unit	Unit cost	Total cost
Jan 1	Beginning inventory	1500	$60	$90000
Jan 30	Purchase	2600	$72	187200
May 1	Purchase	1300	$90	117000
	Total	5400		$394200

Total cost of goods available for sale= $394200

Sales units= 1150+1600= 2750

Ending inventory units= Total units-Sales units

= 5400-2750= 2650 units

a) Last-in, first out

Calculation of Cost of goods sold

Date		Unit	Unit cost	Total cost
May 1	Purchase	1300	$90	$117000
January 30	Purchase	1450	$72	104400
	Total	2750		$221400

January 30 units= Total sales units-Units from May 1= 2750-1300= 1450

Ending inventory= Cost of goods available for sale-Cost of goods sold

= $394200-221400= $172800

b) Weighted average method

Average cost per unit= Total cost of goods available for sale/Total units

= $394200/5400= $73 per unit

Cost of goods sold= $73*2750= $200750

Ending inventory= Cost of goods available for sale-Cost of goods sold

= $394200-200750= $193450

c) FIFO method

Calculation of Cost of goods sold

Date		Unit	Unit cost	Total cost
January 1	Beginning inventory	1500	$60	$90000
January 30	Purchase	1250	$72	90000
	Total	2750		$180000

January 30 units= Total sales units-Units from January 1= 2750-1500= 1250

Ending inventory= Cost of goods available for sale-Cost of goods sold

= $394200-180000= $214200

d) Specific Identification method

Calculation of Cost of goods sold on March 14

Date		Unit	Unit cost	Total cost
January 1	Beginning inventory	(1150*2/5)= 460	$60	$27600
January 30	Purchase	(1150*3/5)= 690	$72	49680
	Total	1150		$77280

Calculation of Cost of goods sold on August 31

Date		Unit	Unit cost	Total cost
January 1	Beginning inventory	(1500-460)= 1040	$60	$62400
May 1	Purchase	(1600-1040)= 560	$90	50400
	Total			$112800

Total cost of goods sold= Cost of goods sold of March 14+Cost of goods sold of August 31

= $77280+112800= $190080

Ending inventory= Cost of goods available for sale-Cost of goods sold

= $394200-190080= $204120

		Amount of Goods Available for Sale	Ending Inventory	Cost of Goods Sold
a.	Last-in, first out	$394200	$172800	$221400
b.	Weighted average cost	$394200	$193450	$200750
c.	First-in, first out	$394200	$214200	$180000
d.	Specific Identification	$394200	$204120	$190080