Question

Short Answer Problems 21. During March, Cee's Crafts Co. purchased bolts of specialty cloth. The company uses a periodic inventory system. The accounting records for the month showed the following information: (15 pts) # of Units Unit Price Total Price 150 $25.00 On hand at the start of the period Purchased during the period: $ 3,750.00 First purchase Second purchase 26.50 27.00 5,300.00 16,200.00 11,200.00 Third purchase 28.00 Number of units available for sale On hand at the end of the period 400 1,350 250 1,100 Number of units sold during the period Compute Cost of Goods Sold and Ending Inventory using each of the following cost flow assumptions (be sure to show your work). a. First-in, First-out b. Last-in, First-out c. Weighted Average

Answer 1

Periodic inventory System: In this system, the cost of sales and inventory are determined as the end of the accounting period. ans a FIFO : In this method it is assumed that inventory which is purchased first will be sold first and the inventory will consist of recent purchases. Cost of Goods Sold Ending inventory Date Unit Rate Amount Date Unit Rate Beginning Inv 150 $25.00 $3,750 Third Purchase 250 $28.00 First Purchase 200 $26.50 $5,300 Second Purchase 600 $27.00 $16,200 Third Purchase 150 $28.00 $4,200 $29,450 250 Amount $7,000 950 L $7,000 Date ans b LIFO : In this method it is assumed that inventory which is purchased last will be sold first and the inventory will consist of old purchases. Cost of Goods Sold Ending inventory Date Unit Rate Amount Unit Third Purchase 400 $28.00 $11,200 Beginning Inv 150 Second Purchase $27.00 $16,200 First Purchase 100 First Purchase 100 $26.50 $2,650 1,100 $30,050 250 Rate $25 Amount $3,750 $2,650 600 $27 $6,400 Unit ans c In weighted average cost method per unit purchase is derived by adding cost opening inventory and purchase made during the year and then dividing it by the adding the units of opening inventory and units purchased during the year Cost of Good Available for sale Date Rate L Amount Particulars Unit Rate / Amount Beginning Inv 150 $25 $3,750 Cost of good sold 1,100 $27.00 $29,700 First Purchase 200 $27 $5,300 Ending Inventory 250 $27.00 $6,750 Second Purchase 600 $27 $16,200 Third Purchase 400 $28 $11,200 Cost of Good Available for sale 1,350 $36,450 Average Rate [$36450/950] $27.00