Question

LU 18-1a PRACTICE GujZ WITH WORKED OUT SOLUTIONš Need more practice? Try this Extra Practice Quiz (check igures in the Interactive Chapter From the following, calculate (a) the cost of ending inventory and (b) the cost of goods sold under the assumption of (1) weighted average, (2) FIFO, and (3) LIFO (ending inven tory shows 58 units): Number of books purchased for resale 20 60 40 50 cam be found in Appendix B at end of text. Cost per unit $4 Total $ 80 180 January 1 inventory March 1 April 1 November1 7 350

Answer 1

Working Notes: Given that Ending inventory shows as 58 units. Therefore, No. of units sold will be 112 units ( ie, Total units-Ending inventory-170-58)· It is assumed to be All sales are of ending of Fiscal Year, Due to lack of Information about sales

1) Formula Rate of cost per unit Total amount/Total Units Weighted average Purchase Cost of goods sold Ending Invento Date Unit cost | # of units | Cost per | Sold Cost of No. of units Cost per Inventor Balnce Activity Units in unit Goods slod Available unit 4 Jan. 1 Purchased20 4 20 Mar-01 Purchased60 20 4 180 80 3.25 260 Apr-01 Purchased 40 200 20 180 460 3.83 Nov.-01 Purchased50 200 20 4 180 350 810 170 4.76 (a) So, the Cost of Ending Inventory is 276.08 i.e; (4.7658 units) (b) The Cost of Goods Sold is 533.12 i.e; 4.76 112 units).

2) Perpetual FIFO: Goods Purchased Cost of goods sold Inventory Balance Date Unit cost | # of units Cost per l Sold Cost of # of units Sold 20 Cost perInventor Balnce Activity Units in unit Goods slod unit 4 Jan. 1 Purchased20 Mar-01 Purchased60 20 180 Apr-01 Purchased 20 180 Nov.-01 Purchased50 20 180 50 170 810 Dec-31 Sold 20 180 160 420 50 32 390 (a) So, the Cost of Ending Inventory is 390 (b) The Cost of Goods Sold is 420

3) Perpetual LIFO: Goods Purchased Cost of goods sold Date Unit cost | # of units | Cost per | Sold Cost of # of units Sold 20 Cost per Inventor Activity Units unit Goods slod unit Balnce Jan. 1 Purchased20 4 Mar-01 Purchased60 20 80 Apr-01 Purchased 40 20 Nov.-01 Purchased50 20 50 170 350 810 350 200 Dec-31 Sold 20 38 114 194 616 (a) So, the Cost of Ending Inventory is 194 (b) The Cost of Goods Sold is 616.