Question

Bonita Company’s record of transactions for the month of April was as follows.

Bonita Companys record of transactions for the month of April was as follows. Purchases April 1 (balance on hand) 780 @ $6.0

Assuming that periodic inventory records are kept in units only, calculate the average-cost per unit. (Round answer to 2 deci

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Answer #1

Average cost

Date Purchases / Sale Inventory balance Rate Closing Inventory Average Cost
01-Apr                -               780            6.00          4,680            6.00
03-Apr            -650             130            6.00             780            6.00
04-Apr          1,950          2,080            6.08        12,636            6.08
08-Apr          1,040          3,120            6.40        19,292            6.18
09-Apr         -1,820          1,300          8,038            6.18
11-Apr            -780             520          3,215            6.18
13-Apr          1,560          2,080            6.50        13,355            6.42
21-Apr             910          2,990            6.60        19,361            6.48
23-Apr         -1,560          1,430          9,260            6.48
27-Apr         -1,170             260          1,684            6.48
29-Apr             650             910            6.79          6,097            6.70
LIFO
Date Purchases / Sale Inventory balance Rate Closing Inventory Average Cost
01-Apr                -               780            6.00          4,680            6.00
03-Apr            -650             130            6.00             780            6.00
04-Apr          1,950          2,080            6.08        12,636            6.08
08-Apr          1,040          3,120            6.40        19,292            6.18
09-Apr         -1,820          1,300          7,894            6.07
11-Apr            -780             520          3,151            6.06
13-Apr          1,560          2,080            6.50        13,291            6.39
21-Apr             910          2,990            6.60        19,297            6.45
23-Apr         -1,560          1,430          9,066            6.34
27-Apr         -1,170             260          1,461            5.62
29-Apr             650             910            6.79          5,875            6.46
The Average cost of Inventory is $6.70
The Inventory value at Average cost is $6,097.09 & LIFO is $5,874.70
FIFO
Date Purchases / Sale Inventory balance Rate Closing Inventory Average Cost
01-Apr                -               780            6.00          4,680            6.00
03-Apr            -650             130            6.00             780            6.00
04-Apr          1,950          2,080            6.08        12,636            6.08
08-Apr          1,040          3,120            6.40        19,292            6.18
09-Apr         -1,820          1,300          8,237            6.34
11-Apr            -780             520          3,328            6.40
13-Apr          1,560          2,080            6.50        13,468            6.48
21-Apr             910          2,990            6.60        19,474            6.51
23-Apr         -1,560          1,430          9,499            6.64
27-Apr         -1,170             260          1,829            7.03
29-Apr             650             910            6.79 6,242            6.86

Under FIFO , Inventory value is $6,242 & under LIFO Inventory value is $5,875

Cost of goods sold under FIFO is opening Inventory + Purchases - Closing Inventory

= $4,680+ $39,072-$6,242 = $37,509

In Inflationary period , FIFO method will show highest Net income because under FIFO the Purchases made first will be used first and thus with Inflation economy , the purchases with higher cost will be remaining in Inventory will result in higher Closing Inventory value.

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