Question

QUESTION 1: MERCHANDISING AND INVENTORY VALUATIONS (20 MARKS 1. A merchandising businesses ng business sells merchandise for $20,000 cash. This matchandises bid or $20.000 cash. This marcha the company $12,000. the company uses a perpetual inventory method. Prepare the journal entries to record this sale (4 marks) Date Account Title Ref Debit INVENTORY VALUATIONS Beta Radios uses a periodic inventory system. The beginning inventory of Model XS radios and the purchases for the year were as follows (16 marks) Jan. 1 Beginning inventory Apr. 15 Purchase 1,000 units @ $10.00 500 units @ $12.00 300 units @ $13.00 1,000 units @ $14.00 TOPO 6900 3900 June 7 Purchase Sept. 22 Purchase Dec. 4 Purchase 700 units @ $15.00 11500 Total available for sale in the year 3,500 units At December 31, the ending inventory consisted of 1,000 units. Determine the cost of the year-end inventory and the cost of goods sold under each of the following methods of inventory valuation (4 marks for each answer): COST OF INVENTORY GOODS SOLD VALUE AT DEC. 31 FIFO AVERAGE COST

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format.

Answer Part 1) Date Ref Credit Debit $ $ 12,000 20,000 Account Title Title 1 Cost of goods sold Cash Merchandise Inventory Sales revenue (to record sales of goods and it cost of goods sold) $ $ 12,000 20,000 Part 2) Firstly we have to calculate the cost of goods available for sale = units * cost per unit = (1000*10)+(500*12)+(300*13)+(1000*14)+(700*15) = $44400 Ending value as on 31 dec. as FIFO = units in ending inventory * costas per FIFO = (700*15)+(300*14) = $ 14700

2 3 Cost of goods sold FIFO 4 = Goods available for sale - ending inventory 5 = 44400-14700 6 = $ 29700 3 Average cost of cost of goods sold 9 = no. of units sold * average cost 0 = ( 3500-1000) * (44400/3500) 1 = $ 31714 3 Average cost ending inventory 4 = no. of units in ending inventory * average cost 5 = 1000 * 44400/3500) 5 = $ 12686 3 Thus the final answer Cost of goods sold D FIFO 29700 1 Average Cost 31714 ending inventory 14700 12686