Question

E6-4 Zhu Boards sells a snowboard, oute inventory and cost of goods sold using FIFO and average cost. (LO2) as sells a snowboard, Xpert, that is popular with snowboard enthusiasts. elating to Zhu's purchases of Xpert snowboards during September is shown page. During the same month, 121 Xpert snowboards were sold. Zhu's uses a Xpert snowboards a on the next page. During the same mor periodic inventory system. sere sold. Zhu Date Explanation Units Unit Cost Total Cost Sept. 1 Inventory 23 HK$ 970 HK$ 22,310 Sept. 12 Purchases 45 1,020 45,900 Sept. 19 Purchases 1,040 20,800 Sept. 26 Purchases 1,050 46,200 Totals 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? . ..b following for the 0113 20 Compute inventory and cost Pd

Answer 1

Solution as per below images:

Calculation For Ending Inventory at Sep 30 and cost of Goods sold as per FIFO Receipt Issued Closing Stock Date Opening Balance Units Units Cost Total Cost Units Units Cost Total Cost Units Units Cost Total Cost Units Units Cost Total Cost (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) Sep-01 Sep-12 22310 22310 23 970 23 970 23 22310 22310 970 23 970 45 45 1020 45900 1020 45900 Sep-12 68 68210 Sep-19 23 970 22310 23 970 22310 45 45 1020 45900 1020 45900 20 1040 20800 20 1040 20800 Sep-19 88 89010 22310 Sep-26 23 970 23 970 22310 1020 45900 45900 45 45 1020 1040 20 1040 20800 20 20800 44 1050 46200 44 1050 46200 Sep-30 132 135210 Sale -23 970 -22310 -23 970 -22310 -45900 -45 1020 -45 1020 -45900 -20 1040 -20800 -20 1040 -20800 -33 1050 -34650 -33 1050 -34650 Sep-30 Closing Inventory 11 1050 11550 Cost of Goods Sold = Opening Stock+Purchase-Closing Stock Cost of Goods Sold = 22310+112900-11550= HK$ 123660o

Calculation For Ending Inventory at Sep 30 and cost of Goods sold as per Average Cost Method Average Unit Cost 1 = (970+1020)/2 = 995 Average Unit Cost 2 = (970+1020+1040)/3 = 1010 %3D Average Unit Cost 3 = (970+1020+1040+1050)/4 = 1020 Receipt Opening Balance Closing Stock Date Issued Units Units Units Cost Total Cost Units Units Cost Total Cost Units Units Cost Total Cost Units Cost Total Cost (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) (in HK$) Sep-01 23 970 22310 23 970 22310 Sep-12 45 1020 45900 68 995 67660 1010 Sep-19 20 1040 20800 88 88880 1020 134640 Sep-26 44 1050 46200 132 Sale -121 1020 -123420 -121 1020 -123420 11220 Sep-30 Closing Inventory 11 1020 Cost of Goods Sold = Opening Stock+Purchase-Closing Stock Cost of Goods Sold = 22310+112900-11220= HK$ 123990 Calculation for Sum of Ending Inventory under both methods Sum of Ending Inventory (FIFO) = Ending Inventory + Cost of Goods Sold = 11550+123660 = HK$ 135210 Sum of Ending Inventory (Average Cost) = Ending Inventory + Cost of Goods Sold = 11220+123990 = HK$ 135210 %3D Under both the methods sum of ending inventory is same i.e HK$ 135210