Question

14. Company “Espresso" is an Italian coffee capsules importer which was established on Jan 01 2015. During 2015 the company's transactions regarding its inventory are as follows: Date Purchase / Sale Amount of capsules Price per capsule (*) 01/Jan/2015 Purchase 4,000 2.00 01/Apr/2015 Purchase ??? 1.50 01/Jun/2015 Purchase 3,000 2.50 01/Sep/2015 Sale 7,000 (*) In $ - before discounts Additional data: According to the agreement between the supplier and “Espresso” company, if the company will acquire more than 5,000 capsules during 2015, it will be entitled to a 10% discount for all capsules acquired during that year (retroactive). 2. Transportation costs are $150 per shipment. 3. Net Purchases (net of discounts and including transportation costs) for 2015 are $18,450. Assume the company is using the perpetual inventory system and FIFO method, what is the amount of COGS for 2015? a. $11,550 b. $ 6,900 c. $12,500 d. $11,100 e. $11,150

Use excel or word- no written work please

Answer 1

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Espresso
Calculation of gross purchases	Amount $
Net purchase	18,450.00
Less:
Transportation costs ($ 150* 3 shipments)	450.00
Net purchase excluding transportation costs	18,000.00
Let Gross purchases	100X
Discount	10%
Discount on Gross purchases is 10% of 100X	10X
So net purchases will be 100X-10X= 90X
It means
90X	18,000.00
X=	18000/90
X=	200.00
Gross purchases	$ 100 X
Gross purchases	100*200
Gross purchases	20,000.00
Date	Purchased units	Price	Cost
1-Jan	4,000.00	2.00	8,000.00
1-Jun	3,000.00	2.50	7,500.00
Total			15,500.00
Gross purchases	20,000.00
Less: Total as calculated above	15,500.00
Value of purchases on 1st April 2015	4,500.00
Price per capsule	1.50
Number of units purchased	3,000.00
Purchase and sale data
Date	Purchased units	Price	Cost
1-Jan	4,000.00	2.00	8,000.00
1-Apr	3,000.00	1.50	4,500.00	This is calculated in workings above.
1-Jun	3,000.00	2.50	7,500.00
Total	10,000.00		20,000.00
Total sales is 7,000 units.
As the company used FIFO method so inventory bought first will be sold first. It means inventory purchased on 1st Jan and 1st April will be used fully for sales on 1 Sep 2015.
Cost of goods sold will be as below:
Date	Purchased units	Price	Cost
1-Jan	4,000.00	2.00	8,000.00
1-Apr	3,000.00	1.50	4,500.00
Total	7,000.00		12,500.00
Less: discount at 10%			1,250.00
Net purchases			11,250.00
Add: Transportation costs ($ 150* 2 shipments)			300.00
Cost of goods sold			11,550.00
So answer is option a. $ 11,550.