Question

The following information is taken from the inventory records of the CNB Company for the month of September: Beginning inventory, 9/1/2021 8,000 units @ $10.00 Purchases: 9/7 6,000 units @ $10.70 9/25 16,000 units @ $10.90 Sales: 9/10 6,000 units 9/29 10,000 units 14,000 units were on hand at the end of September. Required: 1. Assuming that CNB uses a periodic inventory system and employs the average cost method, determine cost of goods sold for September and September's ending inventory. 2. Assuming that CNB uses a perpetual inventory system and employs the average cost method, determine cost of goods sold for September and September's ending inventory.

Answer 1

Ans. 1	Periodic Average cost method:
	Available for sale
	Date		Units	Rate	Total
	01-Sep		8000	$10.00	$80,000
	07-Sep		6000	$10.70	$64,200
	25-Sep		16000	$10.90	$174,400
	Cost of goods available for sale		30000		$318,600
	Average cost per unit =   Total cost of goods available for sale / Total units available
	$318,600 / 30,000
	$10.62	per unit
	Ending inventory =   Average cost per unit * Ending inventory units
	$10.62 * 14,000
	$148,680
	Cost of goods sold = Total cost of goods available for sale - Ending inventory
	$318,600 - $148,680
	$169,920
Ans. 2	Perpetual Weighted Average method:
	Purchase				Cost of goods sold			Balance
	Date	Quantity	Rate	Total cost	Quantity	Rate	Total cost	Quantity	Rate	Total cost
	01-Sep	8000	$10.00	$80,000				8000	$10.00	$80,000
	07-Sep	6000	$10.70	$64,200				14000	$10.30	$144,200
	10-Sep				6000	$10.30	$61,800	8000	$10.30	$82,400
	25-Sep	16000	$10.90	$174,400				24000	$10.70	256800
	29-Sep				10000	$10.70	$107,000	14000	$10.70	$149,800
	Total				Cost of goods sold		$168,800	Ending inventory		$149,800
	*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).