Question

Zhu Boards sells a snowboard

E6.4 (LO 2) Zhu Boards sells a snowboard, Xpert, that is popular with snowboard enthusiasts. The following information relates to Zhu's purchases of Xpert snowboards during September. During the same month, 121 Xpert snowboards were sold. Zhu's uses a periodic inventory system. Date Explanation Units Unit Cost Total Cost Sept. 1 Sept. 12 Sept. 19 Sept. 26 HKS 970 1,020 Inventory 23 HK$ 22,310 Purchases 45 45,900 Purchases 20 1,040 20,800 Purchases 44 1,050 46,200 Totals 132 HK$135,210 Instructions a. Compute the ending inventory at September 30 and cost of goods sold using the FIFO and average cost methods. Prove the amount allocated to cost of goods sold under each method. b. For both FIFO and average-cost, calculate the sum of ending inventory and cost of goods sold. What do you notice about the answers you found for each method?

Answer 1

Answer: - (a) Periodic - FIFO melhoc :- Unuts arculable for sale = 132 unit's Units sold = 121 Units units in Ending inventon = 13222! = II units ll units x $ 1050 i cost of Endling inventore = $11,550 cost of goods sold = 23 x $970) +(45 x $1020) + (20% $ 1640) + (33x $1050) - $22310 + $ 45900 - $20,800 + $ 34,650 = $ 123,660 Peniodic - weighted average cost :- Total cost = weighted average cost- per unit Units available for scule $ 135,210 132 units = $ 1024.3181 cost of Endling ihienlon = munits x $1024.3181 =$11,267 :: cost of goods sold - 121 units X $ 1024.3181 = $123943

FIFO methoek Sum of endling inventory and cost of goods sold $ $11,550 + $123,660 = $135,210. weighted average cost melhod :- $ 11267 + $1231943 = $135,210 = Given, the total cost of goodly Quailable for sale = $ 135,210. conclusion the sum of Ending mventory and cost of goods sold under both methods will always be the total cost of onits available for sale