Question

Question 1: Inventory Cost Flow [13 marks] Jupiter Ltd uses the periodic inventory method to record the cost of sales. The company had the following inventory information available for the month of May: May Units Unit cost 1 Explanation Beginning inventory Purchase 100 $4 10 500 $5 20 Purchase 100 $7 30 Purchase 300 $8 A physical count of inventory on 31 May revealed that there were 350 units on hand. Required: For the purpose of this question, please ignore GST, but show ALL your workings. i. Calculate the cost of Goods Available for Sale for May, as per Figure 5.8 of your text. (5 marks) ii. Calculate the amount assigned to the Ending Inventory on 31 May. Assume that the company uses the FIFO method, as per Figure 5.8 of your text. (3 marks) iii. Calculate the amount assigned to the Ending Inventory on 31 May. Assume that the company uses the weighted average cost method. (2 marks) iv. Calculate the cost of Sales for May. Assume that the company uses the LIFO method. (3 marks)

Answer 1

Requirement (1) Date Activity Units 1-May Beginning Inventory 10-May Purchases 20-May Purchases 30-May Purchases Unit Cost Total Cost 100 $ 4.00 $ 400.00 500 $ 5.00 $2,500.00 100 $ 7.00 $ 700.00 300 $ 8.00 $2,400.00 Cost of goods available for sale $6,000.00 Requirement (2) FIFO Method States That Goods that are Purchased First Will be sold first, Therefore Ending Inventory Consists of goods that are purchased last Ending Inventory of 350 Units : 300 Units @ $8 $ 50 Units @ $7 $ 2,400.00 350.00 Ending Inventory on 31 May $ 2,750.00 $ 6.00 Requirement (3) Average Cost Per Unit ($6000/1000 Units) Ending Inventory on 31 May $ (350 Units @ $6) 2,100.00 Requirement (4) Date Activity Units Unit Cost Total Cost 1-May Beginning Inventory 100 $ 4.00 $ 400.00 10-May Purchases 500 $ 5.00 $2,500.00 20-May Purchases 100 $ 7.00 $ 700.00 30-May Purchases 300 $ 8.00 $2,400.00 Cost of goods available for sale $6,000.00 Less : Ending Inventory of 350 Units 100 Units @ $4 $ 400.00 250 Units @ $5 $1,250.00 $1,650.00 Cost of goods sold - LIFO Method $4,350.00 LIFO Method States That Goods that are Purchased last Will be sold first, Therefore Ending Inventory Consists of goods that are purchased first Note : Please comment down for any issues