Question

Kingbird, Inc.markets CDs of numerous performing artists. At the beginning of March, Kingbird had in beginning inventory 2,500 CDs with a unit cost of $8. During March, Kingbird made the following purchases of CDs. March 5 March 13 2,000 @ 4,000 @ $9 $10 March 21 4,500 @ $11 March 26 2.000 $12 During March 12,100 nits were sold. Kingbird uses a periodic inventory system. Your answer is partially correct. Determine the cost of goods available for sale. The cost of goods available for sale $ 151500 Calculate Average Cost. (Round answer to 3 decimal places, 6. 5.125.) Average Cost $ 30300

Answer 1

Statement showing Cost of Goods Date Units Rate / Product Opening 2500 $ 8 $ 20,000 05-Mar 2000 $ 9 $ 18,000 13-Mar 4000 $ 10 $ 40,000 21-Mar 4500 11 $ 49,500 26-Mar 2000 12 $ 24,000 15000 $ 1,51,500 Cost of Goods available for sale : $ 1,51,500 Average Cost = Total Cost of goods / Total units $151,500 / 15000 units $ 10.10 per unit Computation of Inventory - FIFO basis As 15,000 units were produced and 12,100 were sold Closing Inventory = 2900 units As per FIFO, Stock purchased first will be sold first thus, closing stock will comprise of goods purchase in last i.e, Date of Purchase Units Rate Product 26-Mar 2000 $ 12 $ 24,000 21-Mar 900 $ 11 $ 9,900 Ending Inventory $ 33,900 Cost of goods sold = Total Cost - Ending Inventory = $151,500 - $33,900 $ 1,17,600

Computation of Inventory - LIFO basis As 15,000 units were produced and 12,100 were sold Closing Inventory = 2900 units As per LIFO, Stock purchased first will be sold last thus, closing stock will comprise of goods purchased at begining i.e, Date of Purchase Units Rate Product Opening 2500 $ 8 $ 20,000 05-Mar 400 $ 9 $ 3,600 Ending Inventory $ 23,600 Cost of goods sold = Total Cost - Ending Inventory = $151,500 - $23,600 $ 1,27,900 Computation of Inventory - Average cost basis As 15,000 units were produced and 12,100 were sold Closing Inventory = 2900 units Ending Inventory = 250 units x $10.10 $ 29,290.00 1500 units x $10.10 $1,22,210.00 Cost of Goods sold = The Ending Inventory The cost of Goods sold $ $ FIFO 33,900 $ 1,17,600 $ LIFO 23,600 1,27,900 Average Cost $ 29,290 $ 1,22,210

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