Question

QUESTION 3: P6-4A Sandoval Skateshop Ltd. reports the following inventory transactions for its skateboards for the month of April. The company uses a perpetual inventory system.

Date	Explanation	Units	Unit Cost	Total Cost
Apr. 1	Beginning inventory	30	$50	$1,500
6	Purchases	15	45	675
9	Sales	(35)
14	Purchases	20	40	800
20	Sales	(25)
28	Purchases	20	35	700

Instructions

(a) Determine the cost of goods sold and cost of ending inventory using FIFO.

(b) Assume that Sandoval wants to change to the average cost formula. What guidelines must it consider before making this change?

(c) If the company does change to the average cost formula and prices continue to fall, would you expect the cost of goods sold and ending inventory amounts to be higher or lower than these amounts when using FIFO?

Answer 1

Sand-oral Skateshop Ltda Calulation of cost of goods sold Curit) Page No. cals formula 200p = Beging invente einventory & furchase - closing shore = closing stock = ? 28 ထn) -UNIE op.stock A purchase 30 15 20 20 (35) (2 25 - sales closing stok cost of goods sold op. Stove & Punchre - cloirosdec + 55 - 25 160 unit month purchase aty Poice tabl 10000 6 apr 15 45 vale 0000 675 sales. Qty Prie - - value - Balanie aty Prie valo! 30 50 SV 15 45 675 145 2175 9 apol 150 30 50 उम 1725 14 april 20 yo qw 10 45 450 20 40 8w 30 251 7

Date 2004 450 1900 40 126 20 35 700 - 20 35 200 70 900 opol 25 o f Sandoval want to change Are to awarge Cost Formula . it is a change in accounting kronespues poling . it must be applied retrospectively in the finanval statment. Retrospective application means that entity implements the change in accounting policy as thought it had always been applied the entity shall cacliuunt all comparative amout presented in the financed statements. affected by cate the change in accouting polley tis each prior period presented.