Question

Sunland Co. began operations on July 1. It uses a perpetual inventory system. During July, the company had the following purchases and sales. Purchases Unit Cost Units Sales Units $150 Date July 1 July 6 July 11 July 14 July 21 July 27 $164 $175

Answer 1

i) Average inventory cost per unit: Date Ending Per unit Units price (A) ( B Total (C=Ax B ) Average inventory cost per unit ( CA) 01-Jul 06-Jul 11-Jul $150.00 $150.00 $150.00 $150.00 $150.00 $164.00 Total 14-Jul 21-Jul 5 2 2 6 8 3 3 7 10 10 $750 $300 $300 $984 $1,284 $482 $482 $1,225 $1,707 $1,707 $160.50 $160.50 $160.50 $160.50 $175.00 Total 27-Jul $170.65 $170.65 $170.65

ii) Ending inventory (Refer working ) MOVING- FIFO AVERAGE $875 $853 $814 LIFO FIFO costing method produces the highest ending inventory valuation.

Working:

1. FIFO Inventory costing method: Date Purchase Per unit price (b) Units (a) Units Cost of merchandise sold Per unit Units Total price (axb) (b) Total (axb) (a) (a) 01-Jul 06-Jul 11-Jul 5 2 3 $150.00 $450.00 Ending inventory Per unit Total price (axb) (b) $150.00 $750.00 $150.00 $300.00 $150.00 $300.00 $164.00 $984.00 $42.00 $0.00 $46.00 $138.00 $164.00 $492.00 $175.00 $1,225.00 $164.00 $984.00 1 14-Jul VOT 2 3 $150.00 $164.00 $300.00 $492.00 0 3 3 7 21-Jul 7 $175.00 $1,225.00 3 27-Jul C16Aol $164.00 $175.00 2 $492.00 $350.00 $2,084.00 $175.00 5 5 $875.000 $875 TOTAL 13 $2,209.00

2. Average inventory costing method: Date Purchase Per unit price (b) Units (a) Units Cost of merchandise sold Per unit Units Total price (axb) (b) Total (axb) Ending inventory Per unit Total price (axb) (a) (a) (b) 01-Jul 06-Jul 3 $150.00 $450.00 2 8 11-Jul 6 $164.00 $984.00 $150.00 $150.00 $160.50 $160.50 $170.65 $170.65 14-Jul 5 $160.50 $802.50 3 $750.00 $300.00 $1,284.00 $481.50 $1,706.50 $853.25 $853 21-Jul $175.00 $1,225.00 10 $170.65 27-Jul TOTAL $853.25 $2,105.75 $2,209.00 13

3. LIFO inventory costing method: Date Units Purchase Per unit price (b) Cost of merchandise sold Per unit Units Total (axb) Total (axb) Units price (a) (a) (b) 01-Jul 3 $150.00 $450.00 06-Jul 11-Jul 6 $164.00 $984.00 14-Jul Ending inventory Per unit Total price (axb) (b) $150.00 $750.00 $150.00 $300.00 $150.00 $300.00 $164.00 $984.000 $150.00 $300.00 $164.00 $164.00 $150.00 $300.00 $164.00 $164.00 $175.00 $1,225.00 $150.00 $300.000 $164.00 $164.00 $175.00 $350.00 $814 1 5 $164.00 $820.00 21-Jul 7 $175.00 $1,225.00 27-Jul $0.00 $175.00 5 13 2 1 2 5 $875.000 $2,145.00 - TOTAL 13 $2,209.00