Question

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

DateActivitiesUnits Acquired at CostUnits Sold at Retail

Mar.1 Beginning inventory 200 units @ $53.00/unit

Mar.5 Purchase 275 units @ $58.00/unit

Mar.9 Sales 360 units@ $88.00/unit

Mar.18 Purchase 135 units @ $63.00/unit

Mar.25 Purchase 250 units @ $65.00/unit

Mar.29 Sales 230 units@ $98.00/unit

  

  

Totals 860 units 590 units

  

  

Answer 1

Concepts and reason

Inventory system: It is the process of recording inventory movement in the store.

Perpetual inventory system: Perpetual inventory system is a method of stock recording. Under this system inventory record is updated with every issuance and receipt of the inventory. It is easy to know cost of goods sold and ending inventory units under perpetual system.

Purpose of Perpetual inventory system: Under perpetual inventory system the updated ending inventory units are always known to verify it with physical units. It helps in stock taking.

Stock taking: Stock taking is known as physical counts of units lying in store as ending inventory.

First in and first out (FIFO) method: Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.

Fundamentals

Issuance of inventory: It means the outgoing of units out of store for sale or other purpose.

Receipt of inventory: It means the incoming of units into the store through purchase or by other means.

Updating inventory record: It means knowing the ending inventory in the store with every receipt and issuance of units into and out of store.

Beginning inventory: Beginning inventory is the unit lying in store due non-issuance in previous period. Beginning inventory of the current period was the ending inventory for the previous period.

Ending inventory: Ending inventory unit is the units lying in the store due its-non issuance in current period. Ending inventory for the current period is the beginning inventory for the next period.

Determine the balance after purchase:

Therefore, the balance after purchase is 860 units.

Calculation of ending inventory for W Company on 29^th March:

Therefore, ending inventory is 270 units.

Ans:

The ending inventory as on 29^th March is 270 units.