Question

E 8-14 Inventory cost flow methods perpetual system • LO8-1, LO8-4 [This is a variation of E 8-13 modified to focus on the perpetual inventory system and alternative cost flowm Altira Corporation provides the following information related to its merchandise inventory during the me of August 2021: Aug. 1 Inventory on hand-2,000 units; cost $5.30 each. 8 Purchased 8,000 units for $5.50 each. 14 Sold 6,000 units for $12.00 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 $5.80 each. 31 Inventory on hand-7,000 units. na Required: Using calculations based on a perpetual inventory system, determine the inventory balance Altira in its Aueust 31. 2021. balance sheet and the cost of goods sold it would report in its August 2021 ment using each of the following cost flow methods: 1. First-in, first-out (FIFO) Average cost V system

Answer 1

Ans E-8-14-1 Perpetual inventory System: In this system, the cost of sales and inventories are updated on every sales and purchase transactions. First in, first out method (FIFO): In this method it is assumed that inventory which is purchased first will be sold first and the inventory will consist of recent purchases. Purchase Cost of Good Sold Perpetual FIFO Ending inventory -Perpetual FIFO Perpetual FIFO | No of Unit Cost Per Unit Total No of Unit Cost Per Unit Total No of Unit Cost Per Unit Total Aug 1 2000 $5.30 $10,600.00 Aug 8 8000 $5.50 $44,000.00 2000 $5.30 $10,600.00 8000 $5.50 $44,000.00 10000 $54,600.00 Aug 14 2000 $5.30 $10,600.00 4000 $5.50 $22,000.00 4000 $5.50 $22,000.00 6000 $32,600.00 4000 $22,000.00 Aug 18 6,000 $5.60 $33,600.00 4000 $5.50 $22,000.00 6000 $5.60 $33,600.00 10000 $55,600.00 Aug 25 4000 $5.50 $22,000.00 3000 $5.60 $16,800.00 3000 $5.60 $16,800.00 7000 $38,800.00 3000 $16,800.00 Aug 28 4,000 $5.80 $23,200.00 3000 $5.60 $16,800.00 4,000 $5.80 $23,200.00 7000 $40,000.00 Total 18000 $1,00,800.00 13000 $71,400.00 Inventory Cost 7000 $40,000.00 Cost of good Sold $71,400.00 Ending Inventory $40,000.00

Ans E-8-14-2 In average cost method per unit cost is derived by dividing total cost of goods available for sale by total units available at each transaction of sale or purchase. Purchase Cost Per Unit Cost of Good Sold Cost Per Unit No of Unit Total No of Unit Total Perpetual Weighted Aug 1 Aug 8 8000 $5.50 $44,000.00 Ending inventory No of Unit Cost Per Unit 2000 $5.30 2000 $5.30 8000 $5.50 10000 $5.46 4000 $5.46 Total $10,600.00 $10,600.00 $44,000.00 $54,600.00 $21,840.00 Average Aug 14 6000 $5.46 $32,760.00 Average Aug 18 6,000 $5.60 $33,600.00 4000 4000 6000 10000 3000 $5.46 $5.46 $5.60 $5.54 $5.54 $21,840.00 $21,840.00 $33,600.00 $55,440.00 $16,632.00 Average Aug 25 7000 $5.54 $38,808.00 Average Aug 28 4,000 $5.80 $23,200.00 3000 3000 4,000 7000 $5.54 $5.54 $5.80 $5.69 $ 16,632.00 $16,632.00 $23,200.00 $39,832.00 18000 $1,00,800.00 13000 $71,568.00 7000 $39,832.00 Total inventory Cost Cost of good Sold Ending Inventory $71,568.00 $39,832.00