Question

P6-13A Kane Ltd. had a beginning inventory on January 1 of 250 units of product SXL at a cost of $160 per unit. During the year, purchases were as follows:

	Units	Unit Cost	Total Cost
Mar. 15	700	$150	$105,000
July 20	500	145	72,500
Sept. 4	450	135	60,750
Dec.  2	100	125	12,500

Kane uses a periodic inventory system. At the end of the year, a physical inventory count determined that there were 200 units on hand.

Instructions

(a) Determine the cost of goods available for sale.

(b) Determine the cost of the ending inventory and the cost of the goods sold using (1) FIFO and (2) average cost. (Use unrounded numbers in your calculation of the average unit cost but round to the nearest cent for presentation purposes in your answer.)

Answer 1

(a) Cost of goods Available for Sale $ 290,750 (b) 1 FIFO 2 Average Cost Ending inventory Cost of goods Sold S 26,000S 264.750 $ 29,075 S 261.675 Notes: (a) Cost of goods Available for Sale Particulars January. 1 Mar.15 July 20 Sept.4 Dec.2 Cost of goods Available for Sale Units 250 700 500 450 100 2000 Unit Cost 160S 150 S 145 $ 135s 125 $ Total 40,000 105,000 72.500 60.750 12.500 290.750 (6) FIFO Method: Production Units = 250+700+500+450+100 =2000 Ending Inventory Units = 200 Sale Units = 2000-200 =1800

Cost of Goods sold Particulars January 1 Mar.15 July 20 Sept.4 Units 250 700 500 350 Unit Cost 160 S 150 S 145 S 135 Total 40,000 105,000 72,500 47,250 264.750 S 1800 S Ending Inventory = 100*$135 +100*$125 = $26,000 Average Cost Method Unit Cost II Total Cost/No of Units available for Sale $290.750/2000 = $145.375 1800*$145.375 = $261.675 200*$145.375 = 29,075 II Cost of Goods Sold Ending Inventory II