Question

. Kiwi Ltd., which uses a perpetual inventory system, recorded the following inventory transactions for this year (20 marks):

                                                                      Purchases                                  Sales   

                                                            Units   Unit Cost                     Units   Selling Price/Unit

Apr      1          Beginning inventory   90        $ 16

            25       Purchase                      300      18

May     4          Purchase                      130      20

            16        Sale                                                                             240      $32

Jun       4          Purchase                      100      24

Instructions

(a)        Using the FIFO cost formula, calculate the cost of goods sold for the quarter ended June 30. Show calculations. (10 marks)

(b)        Using the average cost formula, calculate the ending inventory at June 30. Show calculations and use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer. (10 marks)

Answer 1

Correct Answer:

Requirement 1:

	FIFO
Cost of Goods Sold	$               4,140.00

Working:

FIFO
	Total Units Available for sale			620		$    11,840.00
	Units Sold			240
	Ending Inventory Units			380
	Valuation
	Cost of Goods Sold		90		$                         16.00	$      1,440.00
			150		$                         18.00	$      2,700.00
	Cost of Goods Sold		240	units		$      4,140.00

Requirement 2:

Perpetual inventory	Weighted Average
Ending Inventory	$                   7,483

Working:

Moving average cost
	Inventory balance	Total cost	Average cost for each units
01-Apr	90	$          1,440.00	$        16.0000
24-Apr	390	$          6,840.00	$        17.5385
04-May	520	$          9,440.00	$        18.1538
16-May	280	$          5,083.08	$       18.1538
04-Jun	380	$          7,483.08	$        19.6923

	Weighted Average
A	Total Units Available for sale			620		$    11,840.00
	Units Sold			240
	Ending Inventory Units			380
	Valuation
	Cost of Goods Sold		240		$                    18.1538	$      4,356.92
B	Cost of Goods Sold		240	units		$      4,356.92
A-B	Ending Inventory		380	units		$            7,483

End of answer.

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