Question

Mercer Inc. is a retailer operating in British Columbia. Mercer uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory; the inventory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Mercer Inc. for the month of January 2015 Unit Cost or Selling Price Quantity Description Date Beginning inventory $15 18 27 27 20 20 29 21 200 280 220 20 110 10 180 40 January1 January 5 Purchase January 8 Sale January 10 Sale return January 15 Purchase January 16 Purchase return January 20 Sale January 25 Purchase (a1) Your answer is partially correct. Try again. Calculate the Moving-average cost per unit at January 1, 5, 8, 15, 20, & 25. (Round answers to 3 decimal places, e.g. $5.251.) Moving-Average Cost per unit 15 January 1 16.75 January 5 16.75 January8 16.75 January 10 17.67 January 15

Answer 1

(a1) Unit Cost or Selling Moving Price t Description Quantity g Average Cost Per Unit Calculation Date Beginning inventory 200 units @ $15 $3,000 200 $15 January1 280 units 18 $5,040 $3,000 beginning inventory $8,040/200 280 480 units $16.750 per unit 280 January5 Purchase 18 Left in Inventory: 480 220- 260 units @ $16.750 per unit January 8 Sale 220 27 Left in inventory: 260+20 units 280 units; Average Cost Per Unit (260 $16.750)(20 $27 per unit) ($4,355 $540) $4,895 extended cost/ 280 units $17.482 January Sale return 20 27 110 units@ $20 ($2,200$4,895) $7,095/ (110+ 280 units 390) $18.192 January 15 Purchase 110 20 Left in inventory: 390 10 units 380 units; Average Cost Per Unit (390 $18.192)-(10 $20 per unit) ($7,094.88-$200.00) $6,894.88 380 units $18.144 January Purchase 16 10 20 return Left in inventory: 380 180 200 units @ $18.144 - $3,628.8 January 20 Sale 180 anuaryPurchase 25 40 units @ $21 ($840 $3,628.8) $4,468.8/ (200 +40 units 240 units) $18.620 40 21

(a2) Sales under each of the 3 cost flow assumptions: January 8: 220 units @ $27 each = $5.940 January 10: Sales Return of 20 units @ $27 ($540) January 20: 180 units @ $29 each $5,220 Therefore, Total Sales = ($5,940-$540 + $5,220) : $10,620 LIFO Total Sales (see above) $10,620 Cost of Sales: January 8 Sales: 220 units@ $18 each $3,960 January 10: Sales Return: 20 units@$18 each ($560) January 20: Sales: 180 units: 100 units @$20 each 80 units@ $18 each $2,000 $1,440 $3,440 Cost of Sales: ($3,960-$560 $3,440) $6,840 Gross Profit ($10,620 $6,840) $3,780 Ending Inventory: 200 units @ $15 each $3,000 40 units @ $21 each $840 Therefore, Ending Inventory under LIFO ($3,200+$920) $3,840

FIFO Total Sales (see above) $10,620 Cost of Sales: January 8 Sales: 220 units: 200 units @ $15 each20 units $18 each January 10: Sales Return: 20 units @ $18 each ($560) January 20: Sales: 180 units: 180 units@ $18 each $3,240 Cost of Sales: ($3,360-$560 $3,240) $6,040 Gross Profit ($10,620 $6,040) $4,580 $3,000+$360 $3,360 Ending Inventory: 100 units @ $18 each $1,800 100 units @ $20 each $2,000 40 units @ $21 each $840 Therefore, Ending Inventory under FIFO ($1,800+$2,000+ $840) $4,640 Moving-average cost. Total Sales (see above) $10,620 Cost of Sales (see Requirement 1 for Moving-average cost before each sale below) January 8 Sales: 220 units: 220 units @ $16.750 $3,685 January 10: Sales Return: 20 units @ $18 each ($560) January 20: Sales: 180 units: 180 units $18.144 each $3,266 Cost of Sales: ($3,685-$560 $3,266)-$6,391 Gross Profit ($10,620 $6,391) $4,229 Ending Inventory under Moving-Average See Requirement 1: 240 units @ $18.620 (moving-average cost) $4,469