[The following information applies to the questions displayed below.] Pete’s Ten

Question

[The following information applies to the questions displayed below.]

Pete’s Tennis Shop has the following transactions related to its top-selling Wilson tennis racket for the month of August. Pete’s Tennis Shop uses a periodic inventory system

For the specific identification method, the August 4 sale consists of rackets from beginning inventory, the August 13 sale consists of rackets from the August 11 purchase, and the August 26 sale consists of one racket from beginning inventory and 10 rackets from the August 20 purchase.

Calculate ending inventory and cost of goods sold at August 31, using the specific identification method.

Using FIFO, calculate ending inventory and cost of goods sold at August 31.

Using weighted-average cost, calculate ending inventory and cost of goods sold at August 31. (Round your intermediate and final answers to 2 decimal places.)

  Date Transactions Units Cost per
Unit Total Cost   August 1 Beginning inventory 8     $141       $ 1,128        August 4 Sale ($130 each) 5       August 11 Purchase 10     131       1,310        August 13 Sale ($145 each) 8       August 20 Purchase 10     121       1,210        August 26 Sale ($155 each) 11       August 29 Purchase 11     111       1,221      $ 4,869    

Explanation / Answer

Answer:

Beginning Inventory = 8 units
Units Purchased = 10 + 10 + 11 = 31 units
Units sold = 5 + 8 + 11 = 24 units
Ending Inventory= Beginning Inventory + Units Purchased – Units sold
Ending Inventory= 8 + 31 – 24
Ending Inventory= 15 units

Cost of Goods available for Sale = Cost of Beginning Inventory + Cost of Purchased
Cost of Beginning Inventory = $1,128
Cost of Purchases = $1,310 + $1,210 + $1,221 = $3,741
Cost of Goods available for sale = $1,128 + $3,741 = $4,869

Specific Identification Method:

Cost of Goods sold = (5 * $141) + (8 * $131) + [(1*$141) + (10 * $121)]
Cost of Goods sold = $705 + $1,048 + [$141 + $1,210]
Cost of Goods sold = $3,104

Cost of Ending Inventory = $4,869 - $3,104
Cost of Ending Inventory = $1,765

FIFO Method:

Cost of Goods sold = (8 * $141) + (10 * $131) + (6 * $121)
Cost of goods sold = $1,128 + $1,310 + $726
Cost of Goods sold = $3,164

Cost of Ending Inventory = $4,869 - $3,164
Cost of Ending Inventory = $1,705

Weighted Average Cost:

Weighted Average Cost per unit = Cost of Goods available for Sale / Units Available for Sale
Weighted Average Cost per unit = 4,869 / 39
Weighted Average Cost per unit = $124.85

Cost of Goods sold = $124.85 * 24
Cost of Goods sold = $ 2,996.40

Cost of Ending Inventory = $124.85 * 15
Cost of Ending Inventory = $1,872.75

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