Question

Question 1 (20 marks) Brilliant Company uses the periodic inventory system. The company's beginning inventory and later purchases of inventory during June 2020 were as below: Jun 01: Beginning inventory, 40 units @ $26 per unit. Jun 17: Inventory purchased, 85 units @ $32 per unit. Jun 25: Inventory purchased, 60 units @ $34 per unit. Brilliant company sold 110 units during the month of June 2020. Required: a. Calculate the cost of goods sold and ending inventory for June 2020 using both the Weighted Average cost and First in, first out (FIFO) method. (14 marks) b. Also record the journal entries for the June 17 purchase of inventory and when 70 units from this lot were sold for $45 each. Assume both purchase of inventory and its sale are on account. (6 marks)

Answer 1

Date	Particulars	Weighted average method	FIFO method
June 1 2020	Beginning Inventory	(40×26) = 1040	(40×26) = 1040
June 17 2020	Purchase	(85×32) = 2720	(85×32) = 2720
June 25 2020	Purchase	(60×34) = 2040	(60×34) = 2040
June	Cost of goods sold	(110×31.35) = 3449	(40×26+70×32) = 3280
June 20 2020	Ending Inventory	(75×31.35) = 2351	(15×32+60×34) = 2520

Here it is assumed that all sales are made after June 17 2020

b)JOURNAL ENTRIES

Date	Account Titles	Debit	Credit
June 17 2020	Purchase	$2720
	Accounts Payable		$2720
(Being inventory purchased on account)
June 17 2020	Accounts Receivable	$3150
	Sales		$3150
( Being sales made on account)
June 17 2020	Cost of goods sold	2240
	Inventory		2240
( Being cost of inventory sold (70×32) assuming inventory purchased on that date was sold )

Here, it is considered that the business keeps purchase and sales account. In that case purchase account is zeroed at the end of the period by moving the balance into inventory.

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