Ziad Company had a beginning inventory on January 1 of 264 units of Product 4-18
ID: 2507964 • Letter: Z
Question
Ziad Company had a beginning inventory on January 1 of 264 units of Product 4-18-15 at a cost of $19 per unit. During the year, the following purchases were made.Mar. 15 704 units at $22 Sept. 4 616 units at $25 July 20 440 units at $23 Dec. 2 176 units at $27
1,760 units were sold. Ziad Company uses a periodic inventory system. Ziad Company had a beginning inventory on January 1 of 264 units of Product 4-18-15 at a cost of $19 per unit. During the year, the following purchases were made.
Mar. 15 704 units at $22 Sept. 4 616 units at $25 July 20 440 units at $23 Dec. 2 176 units at $27
1,760 units were sold. Ziad Company uses a periodic inventory system. LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT FIFO LIFO AVERAGE-COST LINK TO TEXT LINK TO TEXT LINK TO TEXT Open Show Work
Ziad Company had a beginning inventory on January 1 of 264 units of Product 4-18-15 at a cost of $19 per unit. During the year, the following purchases were made.
Mar. 15 704 units at $22 Sept. 4 616 units at $25 July 20 440 units at $23 Dec. 2 176 units at $27
1,760 units were sold. Ziad Company uses a periodic inventory system. Ziad Company had a beginning inventory on January 1 of 264 units of Product 4-18-15 at a cost of $19 per unit. During the year, the following purchases were made. 1,760 units were sold. Ziad Company uses a periodic inventory system. Determine the cost of goods available for sale. The cost of goods available for sale Calculate average cost per unit. (Round answer to 2 decimal places, e.g. 2.25.) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average). (Round answers to 0 decimal places, e.g. 1,250.) Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?
Explanation / Answer
The periodic inventory system only updates the ending inventory balance in the general ledger when you conduct a physical inventory count.This is mainly done at regular intervals.
In this question we assume that valuation is done at the end of the year.
Hence Cost of goods available for sale can be computed using the following formula
Beginning inventory + Purchases = Cost of goods available for sale
=(264*19)+(704*22)+(440*23)+(616*25)+(176*27)
=$50776
Now Average cost of goods can be computed by Using the formula
Total Cost of production or Purchase/Units In inventory
=$50776/2200
=$23.08
NOw Value of ending inventory shall be computed as:
Nunber of units in Closing inventory=Opening stock+purchases-sold
=264+704+440+616+176-1760
Now asper FIFO method the inventory that came last shall be left as closing inventory as the inventory that came first is to be sold first.
Hence the closing stock shall consist of 264 units purchased on 4th of Sept and 176 units purchased on Dec. 2
Hence value of closing stock as per FIFO shall be=
=264*25+176*27
=6600+4752
=$11352
Cost of Goods sold shall be=Cost of goods available for sale-Closing inventory
=50776-11352
=$39424
Now asper LIFO method the inventory that came last shall be sold first and the closing stock shall consist of the inventory bought first.
Hence closing stock shall consist of 264 units as in opening stock and 176 units purchased on March 15
Hence value of closing stock as per LIFO shall be=
=264*19+176*22
=5016+3872
=$8888
Cost of Goods sold shall be=Cost of goods available for sale-Closing inventory
=50776-8888
=$41888
As per average cost we have already computed above
Closing inventory=440*23.08
=10115
COst of goods sold=50776-10115
=$40621
As per FIFO there is highest amount of closing stock in the Balance Sheet
And as per LIFO method there is highest amount of COst of Goods sold
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