Question

14. Company “Espresso” is an Italian coffee capsules importer which was established on Jan 01 2015. During 2015 the company's transactions regarding its inventory are as follows: Date Purchase / Sale Amount of capsules Price per capsule (*) 01/Jan/2015 Purchase 4,000 2.00 01/Apr/2015 Purchase ??? 1.50 01/Jun/2015 Purchase 3,000 2.50 01/Sep/2015 Sale 7,000 (*) In $ - before discounts Additional data: 1. According to the agreement between the supplier and “Espresso” company, if the company will acquire more than 5,000 capsules during 2015, it will be entitled to a 10% discount for all capsules acquired during that year (retroactive). 2. Transportation costs are $150 per shipment. 3. Net Purchases (net of discounts and including transportation costs) for 2015 are $18,450. Assume the company is using the perpetual inventory system and FIFO method, what is the amount of COGS for 2015? a. $11,550 b. $ 6,900 c. $12,500 d. $11,100 e. $11,150

No handwritten work

Answer 1

a.
it is assumed that number of unit purchased on 01/Apr/2015 =x unit
Calculation of no. of unit purchased :
date	purchase unit	purchase price	Amount
1-Jan-15	4000	2	8000
1-Apr-15	x	1.5	1.5x
1-Jun-15	3000	2.5	7500
	total purchase		15500+1.5x
	less:discouunt@10%		1550+0.15x
	(11500*0.10+1.5x*0.10)
	purchase less discount		13950+1.35x
	add:transportation cost		450
	(150*3)
	net purchase		14400+1.35x
we know that net purchase= $18450
or,
18450=14400+1.35x
4050=1.35x
x=3000 units
hence , number of unit purchase on 1/apr/2015 =3000 units
b.
Calculation of cost of inventory
(under FIFOmethod)
date	description	unit	purchase price less duscount	amount	transportation cost	total cost
1-Jan-15	purchase	4000	1.8	7200	150	7350
1-Apr-15	purchase	3000	1.35	4050	150	4200
1-Jun-15	purchase	3000	2.25	6750	150	6900
1-Sep-15	sales	4000	1.8	7200		7350
		3000	1.35	4050		4200
31-Dec-15	inventory	3000	2.25	6750		6900
cost of good sold=7350+4200 =11550
hence .a. COGS=$11550