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Q2 You are provided with the following information for Yuan Berhad for the month of January 2017. Yuan uses the perpetual met
QUESTION 4 Mariam is in business as a retailer. The following balances were extracted from the books of Mariam Enterprise as
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Answer #1
a) 1) FIRST IN FIRST OUT METHOD
Date Purchases Purchase return Cost of goods sold sales return (cost) balance
Jan-01 Beginning inventory 100U*$14 = $1400
Jan-05 150U * $17 = $2550 100U * $14 = $1400
150U * $17 = $2550
Jan-08 110 UNITS
100U * $14 = $1400
10U * $17 = $170 140U * $17 = $2380
Jan-10 10 UNITS
10U * $17 = $170 150U * $17 = $2550
Jan-15 55U * $19 = $1045 150U * $17 = $2550
55U *$19 = $1045
Jan-16 5U * $19 = $95 150U * $17 = $2550
50U * $19 = $950
Jan-20 80 UNITS
80U * $17 = $1360 70U* $17 = $1190
50U * $19 = $950
Jan-25 30U * $22 = $660 70U* $17 = $1190 ENDING INVENTORY
50U * $19 = $950 ENDING INVENTORY
30U * $22 = $660 ENDING INVENTORY
TOTAL UNITS PURCHASED = 230 UNITS ( EXCLUDING RETURN UNITS )
TOTAL PURCHASE COSTS = $ 3860 ( EXCLUDING RETURN )
TOTAL UNITS SOLD = 180 UNITS ( EXCLUDING RETURN UNITS )
COGS = $2760 ( EXCLUDING RETURN )
CALCULATION OF GROSS PROFIT
SALE COGS GP= SALE - COGS
100U*$28 = 2800 100U * $14 = $1400 $1400
80U*$32= $2560 80U * $17 = $1360 $1200
$2600
a)2) AVERAGE COST METHOD
DATE PURCHASE PURCHASE RETURN COGS SALE RETURN INVENTORY BALANCE AVERAGE COST
Jan-01 Beginning inventory 100u*$14=$1400 $14
Jan-05 150U*$17=$2550 250U =$3950 $15.8 (3950/250)
Jan-08 110U*$15.8=1738 140U = $ 2212 $15.8 (2212/140)
Jan-10 10U*$15.8=158 150U=$2370 $15.8 (2370/150)
Jan-15 55U*$19=$1045 205 U = $3415 $16.66(3415/205)
Jan-16 5U*$19=$95 200U= 3320 $16.6 (3320/200)
Jan-20 80U *16.6=$1328 120U=$1992 $16.6(1992/120)
Jan-25 30U*$22=$660 150U=$2652 $17.68(2652/150)
COGS = 1738-158+1328 = $2908
ENDING INVENTORY 150U*$17.68=$2652
GROSS PROFIT = SALES - COGS
SALES : 100U*$28 = 2800
80U*$32= $2560 5360-2908     = 2452

b)COMPARISON:

COGS is higher in average cost method as compared to FIFO method.

The gross profit from FIFO method is higher than Average method due the less cost of goods sold.

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