Question

Brief Exercise 8-7 Inventory cost flow methods; perpetual system [LO8-4] 0.83 points Samuelson and Messenger (S&M) began 2018 with 360 units of its one product. These units were purchased near the end of 2017 for $25 each. During the month of January, 180 units were purchased on January 8 for $28 each and another 360 units were purchased on January 19 for $30 each. Sales of 140 units and 260 units were made on January 10 and January 25, respectively. There were 500 units on hand at the end of the month. S&M uses a perpetual inventory system. Required: 1. Complete the below table to calculate ending inventory and cost of goods sold for January using FIFO method. 2. Complete the below table to calculate ending inventory and cost of goods sold for January using average cost method. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete the below table to calculate ending inventory and cost of goods sold for January using FIFO method. Cost of Goods Sold - January 10 Cost of Goods Sold - January 25 Perpetual FIFO Cost of Goods Available for Sale Cost of # of Cost Goods units per Available unit for Sale 360125.00 $ 9,000 # of units Cost Cost of Goods Sold # of units sold Cost of Goods Sold Cost per unit Inventory Balance # of units in Cost Ending ending per unit Inventory inventory 0 $ 25.00 $ 0 per unit sold 140 $ 25.00 $ 3,500 220 $ 25.00 $ 5,500 Beg. Inventory Purchases: January 8 January 19 Total 0 40 180 360 900 28.00 30.00 5,040 10,800 24,840 28.00 30.00 28.00 1,120 30. 000 $ 6,620 140 360 500 28.00 30.00 3,920 10,800 14,720 $ 140 $ 3,500 260 $ Required 1 Required 2 >

Answer 1

Ans. 1
	FIFO:	Cost of goods available for sale			Cost of goods sold - January 10			Cost of goods sold - January 25			Inventory Balance
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beginning inventory	360	$25.00	$9,000	140	$25.00	$3,500	220	$25.00	$5,500	0	$25.00	$0
	Purchases:
	08-Jan	180	$28.00	$5,040	0	$28.00	$0	40	$28.00	$1,120	140	$28.00	$3,920
	19-Jan	360	$30.00	$10,800	0	$30.00	$0	0	$30.00	$0	360	$30.00	$10,800
	Total	900		$24,840	140		$3,500	260		$6,620	500		$14,720
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
	For January - 10 sales : 140 units were sold from Beginning inventory. Now 220 units are remained in
	beginning inventory (i.e. 360 - 140 = 220 units).
	For January - 25 sales : 220 units were sold from Beginning inventory and remaining 40 units (i.e. 260 - 220 units) are
	sold from January - 8 purchase.
	Ending inventory   =   Units available for sale - Units sold
		Units available (a)	Units sold (b)	Units sold ©	Units in ending
			on Jan. - 10	on Jan. - 25	inventory (a-b-c)
	Beginning inventory	360	140	220	0
	Purchases:				0
	08-Jan	180	0	40	140
	19-Jan	360	0	0	360
	Total	900	140	260	500
Ans. 2	Perpetual Average:	Inventory on hand			Cost of goods sold
		Quantity	Rate	Total cost	Quantity	Average cost	Total cost
	Beginning inventory	360	$25.00	$9,000
	Purchase - January 8	180	$28.00	$5,040
	Subtotal Average Cost	540	$26.00	$14,040
	Sale - January 10	-140	$26.00	-$3,640	140	$26.00	$3,640
	Subtotal Average Cost	400	$26.00	$10,400
	Purchase - January 19	360	$30.00	$10,800
	Subtotal Average Cost	760	$27.89	$21,200
	Sale - January 25	-260	$27.89	-$7,251	260	$27.89	$7,251
	Total	500	$27.89	$13,949	400		$10,891
	Ending Inventory   = $13,949
	Cost of goods sold = $10,891
	*Units are sold on the previous average cost per unit.
	*Average cost per unit = Subtotal cost / Subtotal units.