I\'m having trouble with this problem, everything in the blue boxes is required.
ID: 2574472 • Letter: I
Question
I'm having trouble with this problem, everything in the blue boxes is required.
Brief Exercise 8-7 Inventory cost flow methods; perpetual system [LO8-4] Samuelson and Messenger (S&M;) began 2013 with 360 units of its one product. These units were purchased near the end of 2012 for $20 each. During the month of January, 180 units were purchased on January 8 for $23 each and another 360 units were purchased on January 19 for $25 each. Sales of 170 units and 270 units were made on January 10 and January 25, respectively. There were 460 units on hand at the end of the month. S&M; uses a perpetual inventory system Complete the below table to calculate ending inventory and cost of goods sold for January using FlFO method Cost of Goods Available for Sale Cost of Goods Sold -January 10 Cost of Goods Sold - January 25 Inventory Balance Cost of Cost of | Cost of Goods | # of units | in ending #of #of Cost per Goods units unitAvailable for able for units Cost p unit # of units sold cost per unit Cost per Ending per Goods Sold unit Inventory sold Sold inventory Sale Beg. Inventory $ 0.00 S 0.00 S $0.00 Purchases January 8 January 19 0.00 0.00 0.00 0.00 0.00 0.00 TotalExplanation / Answer
Solution:
Part 1 --- Perpetual FIFO Method
Under perpetual system, inventory is updated after each transaction whether sale or purchase of units.
FIFO method says the oldest units are issued first.
Perpetual FIFO
Cost of Goods Available for sale
Cost of Goods Sold - Jan 10
Cost of Goods Sold - Jan 26
Value of Ending Inventory
#of units
Cost per Unit
Cost of goods available for sale
#of units
Cost per Unit
Cost of goods sold
#of units
Cost per Unit
Cost of goods sold
# of units in ending inventory
Cost per Unit
Ending Inventory
Beginning Inventory
360
$20
$7,200
170
$20.00
$3,400
190
$20.00
$3,800
0
$0.00
$0
Purchases:
January.8
180
$23
$4,140
$0
80
$23
$1,840
100
$23
$2,300
January.19
360
$25
$9,000
$0
0
$0
$0
360
$25
$9,000
Total
900
$20,340
170
$3,400
270
$5,640
460
$11,300
Part 2 --- Perpetual Average Cost Method
Under perpetual system, inventory is updated after each transaction whether sale or purchase of units.
Average Cost Method
Under average cost method, the average cost per unit is calculated and the calculated average cost is applied to the units sold in order to find out cost of goods sold.
Average Unit Cost = Total Cost of material available for sale / total quantity of material available for sale
Cost of Goods Sold = Sold Units x Average Unit Cost
Since company is using perpetual system, the average cost is calculated each time after the incurring of transaction whether purchase or sale.
Perpetual Average
Inventory on Hand
Cost of Goods Sold
#of units
Cost per Unit
Inventory Value
#of units
Avg. Cost per unit
Cost of goods sold
Beginning Inventory
360
$20
$7,200
Purchases - Jan 8
180
$23
$4,140
Subtotal Average Cost
540
$21.00
$11,340
Sale - Jan 10
170
$21.00
$3,570
Subtotal Average Cost
370
$21
$7,770
Purchases - Jan 19
360
$25
$9,000
Subtotal Average Cost
730
$23
$16,770
Sale - Jan 25
270
$23.00
$6,210
Total
460
$23
$10,580
440
$9,780
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Perpetual FIFO
Cost of Goods Available for sale
Cost of Goods Sold - Jan 10
Cost of Goods Sold - Jan 26
Value of Ending Inventory
#of units
Cost per Unit
Cost of goods available for sale
#of units
Cost per Unit
Cost of goods sold
#of units
Cost per Unit
Cost of goods sold
# of units in ending inventory
Cost per Unit
Ending Inventory
Beginning Inventory
360
$20
$7,200
170
$20.00
$3,400
190
$20.00
$3,800
0
$0.00
$0
Purchases:
January.8
180
$23
$4,140
$0
80
$23
$1,840
100
$23
$2,300
January.19
360
$25
$9,000
$0
0
$0
$0
360
$25
$9,000
Total
900
$20,340
170
$3,400
270
$5,640
460
$11,300
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