Question

Required information (The following information applies to the questions displayed below.) Altira Corporation provides the following information related to its merchandise inventory during the month of August 2021 Aug.1 Inventory on hand-2,900 units; cost $7.00 each. 8 Purchased 14,500 units for $6.40 each. 14 Sold 11,600 units for $12.90 each. 18 Purchased 8,700 units for $6.00 each. 25 Sold 10,600 units for $11.90 each. 28 Purchased 4,900 units for $5.80 each. 31 Inventory on hand-8, 800 units. Required: 1. Using calculations based on a perpetual inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using the FIFO method. Cost of Goods Available for Sale Cost of Goods Sold - August 14 Cost of Goods Sold - August 25 Inventory Balance Perpetual FIFO: # of units Cost of Cost per Goods unit Available for Sale # of units sold Cost per unit Cost of Goods Sold # of units sold Cost per unit Cost of Goods Sold Total Cost of Goods Sold # of units in ending inventory Cost per unit Ending Inventory Beg. Inventory Purchases: August 8 August 18 August 28 Total

Answer 1

Ans. 1
	FIFO:	Cost of goods available for sale			Cost of goods sold - August -14			Cost of goods sold - August -25			Ending inventory - Periodic FIFO
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beg. Inv.	2900	$7.00	$20,300	2900	$7.00	$20,300		$7.00		0	$7.00	$0
	Purchases:
	08-Aug	14500	$6.40	$92,800	8700	$6.40	$55,680	5800	$6.40	$37,120	0	$6.40	$0
	18-Aug	8700	$6.00	$52,200		$6.00		4800	$6.00	$28,800	3900	$6.00	$23,400
	28-Aug	4900	$5.80	$28,420		$5.80			$5.80		4900	$5.80	$28,420
	Total	31000		$193,720	11600		$75,980	10600		$65,920	8800		$51,820
	So, the Total cost of goods sold is ($75,980 + $65,920)   = $141,900
	Ending inventory is    $51,820
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
	For August - 14 sales : 2,900 units sold from beginning inventory and remaining 8,700 (i.e. 11,600 - 2,900 = 8,700)
	units sold from purchase of 8 August.
	For August - 25 sales : 5,800 units (i.e. 14,500 - 8,700 = 5,800) sold from August 8 purchase and remaining
	4,800 (i.e. 10,600 - 5,800 = 4,800) units sold from purchase of 18 August.
	Ending inventory   =   Units available for sale - Units sold
		Units available (a)	Units sold on August 14 (b)		Units sold on August 25 ©		Units in ending inventory (a-b-c)
	Beg. Inventory	2900	2900				0
	Purchases:
	08-Aug	14500	8700		5800		0
	18-Aug	8700			4800		3900
	28-Aug	4900					4900
	Total	31000	11600		10600		8800

Ans. 2 Perpetual Average # of Units Inventory on hand Cost per 1 Unit Inventory Value # of units Sold Cost of goods sold Avg.cost per unit Cost of 1 Goods sold Beginning inventory Purchase - August 8 14500 $6.40 $92,800 Inventory Balance # of Units in Cost per Ending inventory | Unit 2900 $7.00 2900 $7.00 14500 $6.40 17400 $6.50 5800 $100 8700 $6.00 14500 $6.20 3900 $6.20 4900 $5.80 8800 $5.98 | Ending Inventory $20,300 $20,300 $92,800 $113,100 $37,700 $52,200 $89,900 $24,180 $28,420 $52,600 I 11600 $6.50 $75,400 Sales - August 14 Purchase - August 18 8700 $6.00 $52,200 10600 $6.20 $65,720 Sales - August 25 Purchase - August 28 4900 $5.80 $28,420 Total Cost of goods sold $141,120 Ending inventory $52,600 *Weighted average rate is calculated by using the formula of (Total available balance / Total units available). *All purchases are added in inventory balance and a new cost per unit is calculated. *Sales are made on the unit cost of inventory balance on previous date.