Question

Question 5: (9 marks) The following is Grapevine's January inventory purchase and sale transactions. Grapevine uses a perpetual inventory system. Cost per 750 ml Bottle $10 Selling price per 750 ml Bottle Qty 100 Date 1-Jan 12-Jan 15-Jan 16-Jan 25-Jan Transaction Beginning Inventory Purchase Sale Purchase Sale 500 400 $25 300 2 310 Required (parts a, b, c & d): Assume that Grapevine uses a weighted average inventory system. Compute Grapevine's ending inventory in dollars and units, cost of goods sold in dollars, and gross profit in dollars at January 31. a. Assume that Grapevine uses a FIFO inventory system. Compute Grapevine's ending inventory in units at January 31.

Answer 1

Solution a:

Computation of ending inventory COGS under Weighted Average Cost - Grapevine
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	100	$10.00	$1,000	0	$0.00	$0	0	$0.00	$0	100	$10.00	$1,000
12-Jan	100	$10.00	$1,000	500	$11.00	$5,500	0	$0.00	$0	600	$10.83	$6,500
15-Jan	600	$10.83	$6,500	0	$0.00	$0	400	$10.83	$4,333	200	$10.83	$2,167
16-Jan	200	$10.83	$2,167	300	$12.00	$3,600	0	$0.00	$0	500	$11.53	$5,767
25-Jan	500	$11.53	$5,767	0	$0.00	$0	310	$11.53	$3,575	190	$11.53	$2,191
Total							710		$7,909	190		$2,191

Gross profit = Sales - COGS = (400*$25 + 310*$27) - $7,909 = $10,461

Solution b:

Grapevine ending inventory in units on January 31 = 190 units