Question

Martinez Ltd. uses the perpetual inventory system and reports the following inventory transactions for the month of June: Date Explanation Units Unit Cost Total Cost June 1 Beginning inventory 1,500 $6 $9,000.00 12 Purchases 2,480 7 17,360 15 Sale (2,610 ) 16 Purchases 4,560 8 36,480 23 Purchases 1,380 9 12,420 27 Sales (5,830 )

(a) Determine the cost of goods sold and the cost of the ending inventory using (1) FIFO and (2) Average cost. (Round average final answers to 2 decimal places, e.g. 1.25. Do not round intermediate calculations.) FIFO Average Cost of goods sold $ $ Cost of ending inventory $ $

On January 3, Culver Corp. purchased 3 portable electronic keyboards for $660 each. On January 20, it purchased 2 more of the same model keyboards for $502 each. During the month, it sold 2 keyboards; 1 was purchased on January 3 and the other was purchased on January 20.

Calculate the cost of goods sold and ending inventory for the month using specific identification.

Cost of goods sold		$
Ending inventory		$

Answer the following questions: Average cost or FIFO METHOD , FIFO COST METHOD , Specific identification method , Average cost method

Which of the three inventory cost formulas must be used if the goods available for sale are identical?
Which cost formula assumes that the first goods purchased are the first to be sold?
Which cost formula matches the actual physical flow of merchandise?

Answer 1

There are different method are used for inventory valuation in the company such as FIFO method, LIFO method,Average cost method and specific identification method. Specific identification method is used for checking the actual flow goods in the company.

A Date June The cost of goods sold and cost of the ending inventory is calculated below - First in Erst out CETFO) Parchete sete ciele particular purchase sale (Issuel Ending Inventar junts Rates units Rates limits Rates Inventay ISOO 6 9000 Regining 12 purchase 2480 7. 17360 1500 6 2480 7 9000 17.360 15 sale 11500 6 110 7 9000/13707 9590 7770 16 I purchase 45608 36,480 11370 7 19590 45608 36,480 23 purchase 1380 9 12,420 (13707 9590 45608 36,480 [1380 9 12,420 27 sale 113707 44608 9590/100 18 35680/1380 9 800 12,420 11480 13220 Ending Inventory 1 Ending inventory CFI FO) = $ 13,220 cost of Goods sold - = Begining inventory & purchase - Ending Inventay - $ 9000 +($17,360 +36,480+12420) - $13,220 = $ 9000 + $ 66.260 - $13.220 - $ 62040 cost of Goods sold = $62040

B) The cost of goods sold and cost of ending inventory is calculated below. Average cost Date particular purchase sale cassus Ending Inventory June units Rak & imits Rate & emits Rate & Inventory Begining parehase 24807 17360 13,9806.623/26360 - 12 26106.623 172861370 6.623 9074 purchase 4560/8 36,480 [9930 7.68245,554 23 purchase (13809 12,420 7310 7931 57974 22 sole | 5830.79311462381480 7.30 11,736 1480 130 0736 Ending Inventay ending Inventory C Average cost) - $ 11,736 cost of goods sold A Begining Inventary + Pas chases - Ending Inventory Es 9000+6817360+36,480+12420) – $14,736 = $ 9000 + $ 66, 260 – 1736 = $ 63,524 cost of goods sold $ 63,524

© cost of goods sold and ending inventary for the month of January by using specific identification method is calculated belowir bate January 3 purchase 3x 8 660 = $1980 January Sale IX & 660 = $ 660 Ending Inventory - $ 1320 aX 8502= 1004 Date January purchase 20 January sale Lending Inventary 1 X as $502= soz $502 Total Ending Inventory = $1320 +8502 3 $ 1822 Frotal Ending Inventay = $1822 cost of goods sold = Beging Inventory & purchases - Ending Inventory - so+(3x 8660 + 2x502) - $ 1822 = $0 + ($ 1980 +$1004) - $ 1822 = $o + $ 2,984 - $ 1822 $ 1162 cost of goods sold = $1162 (d) FIFO method, LIFO method and Average cost I method must be used if the goods available for sale are identical. W EIFO method assume that first goods purchased or first to be sold. The an specific Identification method maches the actual How of merchandise