Question

E8.10 (LO3) (FIFO and Average-Cost Inventory) Esplanade SA was formed on December 1, 2018. The following information is available from Esplanade's inventory records for Product BAP. Units Unit Cost January 1, 2019 (beginning inventory) 600 R$ 8.00 Purchases: January 5, 2019 1,100 9.00 January 25, 2019 1,300 10.00 February 16, 2019 800 11.00 March 26, 2019 600 12.00 A physical inventory on March 31, 2015, shows 1,500 units on hand. Instructions Assuming Esplanade uses a periodic system, prepare schedules to compute the ending inventory at March 31, 2019, under each of the following inventory methods (round to two decimal places). a. Specific identification. b. FIFO. c. Weighted average.

Answer 1

Solution:

a. Specific identification method:

Specific identification method Units from Jan 1 (Beg.) Units from Jan 5 (Purch.) Ending Inventory at March 31,201 Unit cost Total cost Units $8.00 $9.00 $3,200 $9,900 400 1,100 $13,100 1,500

b. FIFO method:

FIFO METHOD Units from March 26 (Purch.) Units from Feb. 16 (Purch.) Units from Jan. 25 (Purch.) Unit cost Total cost Units 600 $12.00 800 $11.00 100 $10.00 $7,200 $8,800 $1,000 Ending Inventory at March 31,2019 $17,000 1,500

c. Weighted average method :

Units Unit Cost Total cost January 1, 2019 (beginning inventory) Purchases January 5, 2019 January 25, 2019 February 16, 2019 600 R$ 8.00 4800 9.00 1,100 9900 10.00 1,300 13000 11.00 8800 800 7200 March 26, 2019 600 12.00 Total cost 43,700

Unit cost = $43,700 / 4,400= $9.93 (rounded off to two decimal places)

Ending Inventory = 1,500×$9.93 = $14,895 (answer)

But if we do not use rounded off unit cost then answer for this part may be varied a bit.

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