Perpetual Inventory System and Inventory Costing Methods The inventory of Wood4F
ID: 2499246 • Letter: P
Question
Perpetual Inventory System and Inventory Costing Methods
The inventory of Wood4Fun and data on purchases and sales for a two-month period follow. The company closes its books at the end of each month. It uses the perpetual inventory system.
In preparing the solutions, it is helpful to determine the balance of inventory after each transaction, as shown in the Business Insight: Concepts and Applications feature in this chapter.
Determine the cost of ending inventory and cost of goods sold for April and May using the average-cost method. Round unit costs to two decimal places and round the final answers to the nearest dollar. Enter all amounts as positive numbers.
1. Determine Cost of Ending Inventory for April and May using the LIFO Method
Apr. 1 Beginning inventory 50 units @ $204 10 Purchase 100 units @ $220 17 Sale 90 units 30 Ending inventory 60 units May 2 Purchase 100 units @ $216 14 Purchase 50 units @ $224 22 Purchase 60 units @ $234 30 Sale 200 units 31 Ending inventory 70 unitsExplanation / Answer
April (average-cost method)
Purchases
Sales
Balance
Date
Units
Unit Cost
Total
Units
Unit Cost
Total
Units
Unit Cost
Total
Apr. 1
50
4.08
204
10
100
2.2
220
150
2.83
424
17
90
2.83
254.4
60
2.83
169.6
30
60
2.83
169.6
April:
Cost of Goods sold =90 x 2.83=$254
Closing Inventory=60 x 28.83=$ 170
MAY (average-cost method)
Purchases
Sales
Balance
Date
Units
Unit Cost
Total
Units
Unit Cost
Total
Units
Unit Cost
Total
60
2.826667
169.6
May. 2
100
2.16
216
160
2.41
385.6
14
50
4.48
224
210
2.902857
609.6
22
60
3.9
234
270
3.124444
843.6
30
200
3.12
624.89
70
3.124444
218.71
31
70
3.12
219
May:
Cost of Goods sold =200 x 3.12=$625
Closing Inventory=70 x 3.12=$ 219
April (LIFO)
Purchases
Sales
Balance
Date
Units
Unit Cost
Total
Units
Unit Cost
Total
Units
Unit Cost
Total
Apr. 1
50
4.08
204
10
100
2.2
220
150
424
17
50
4.08
204
17
40
2.2
88
60
132
30
90
60
2.2
132
April:
Cost of Goods sold =(50 x 4.08) +(40 x2.2) =$204+$88=$292
Closing Inventory=60 x 2.2=$ 132
May (LIFO)
Purchases
Sales
Balance
Date
Units
Unit Cost
Total
Units
Unit Cost
Total
Units
Unit Cost
Total
May. 2
100
2.16
216
60
2.2
132
14
50
4.48
224
22
60
3.9
234
270
806
30
60
2.2
132
30
100
2.16
216
30
40
4.48
179.2
70
278.8
31
200
527.2
70
3.98
278.8
May:
Cost of Goods sold =(60 x 2.2)+(100 x 2.16)+(40 x 4.48)=$ 132 +$ 216 +179.2=$527
Closing Inventory=70 x 3.98=$ 279
April (average-cost method)
Purchases
Sales
Balance
Date
Units
Unit Cost
Total
Units
Unit Cost
Total
Units
Unit Cost
Total
Apr. 1
50
4.08
204
10
100
2.2
220
150
2.83
424
17
90
2.83
254.4
60
2.83
169.6
30
60
2.83
169.6
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