Question

Required Information [The following information applies to the questions displayed below) Altira Corporation provides the following information related to its merchandise Inventory during the month of August 2021 Aug.1 Inventory on hand-2,000 units; cost $5.30 each. 8 Purchased 8,eee units for $5.50 each. 14 Sold 6,000 units for $12.ee each. 18 Purchased 6,000 units for $5.60 each. 25 Sold 7,000 units for $11.00 each. 28 Purchased 4,000 units for 55.80 each. 31 Inventory on hand-7,000 units. 2. Using calculations based on a perpetual Inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 Income statement using the Average cost method. (Round "Average Cost per Unit" to 2 decimal places.) Inventory on hand Cost of Goods Sold Perpetual Average of units Cost per unit Inventory Value of units Ava.Cost Sold per unit Cost of Goods Sold Inventory Balance Hof units in Cost per Ending ending inventory unit inventory Beginning Inventory Purchase - August 8 Sale - August 14 Purchase - August 18 Sale - August 25 Purchase - August 28 Total

Answer 1

Solution

Altira Corporation

Perpetual inventory system –

Determination of the inventory balance Altira would report in its August 31, 2021 balance sheet and the cost of goods sold it would report in its August 31, 2021 income statement using the average cost method:

Perpetual Average	Inventory on Hand	Cost of Goods Sold	Inventory Balance
	# of units	Cost per unit	Inventory Value	# of units	Cost per unit	Inventory Value	# of units	Cost per unit	Inventory Value
Beginning inventory	2,000	$5.30	$10,600				2,000	$5.30	$10,600
Purchase - August 8	8,000	$5.50	$44,000				10,000	$5.46	$54,600
Sale - August 14			6,000	$5.46	$32,760	4,000	$5.46	$21,840
Purchase - August 18	6,000	$5.60	$33,600				10,000	$5.54	$55,440
Sale - August 25			7,000	$5.44	$38,808	3,000	$5.44	$16,632
Purchase August 8	4,000	$5.80	$28,420				7,000	$6.45	$45,052
Total	20,000		$116,620	13,000		$71,568	7,000	$6.45	$45,052

The average cost of inventory is computed after every purchase.

After August 8 purchase, the inventory balance is $54,600 while the units total to 10,000. Hence, average cost per unit = $54,600/10,000 = $5.46

The cost of goods sold for August 14 sale is computed on the average cost per unit of $5.46

The cost of goods sold = $32,760

After August 18 purchase, the inventory balance $55,440, number of units = 10,000 and the average cost per unit is $5.44

The sale on August 25, cost of goods sold is computed at $5.44, to arrive at $38,808.

Hence total cost of goods sold for August = $71,568