PROBLEM #3 (Worth 9 %) Inventory Methods-SHow ALL YOURwORK! from Banner\'s inven

Question

PROBLEM #3 (Worth 9 %) Inventory Methods-SHow ALL YOURwORK! from Banner's inventory record for Product X. January 1, 20X1 Banner Company was formed on December 1, 20X0. The following information is available Units 1,600 Unit Cost Total Cost $18.00 $28,800 Purchases: January 5, 20X1 February 16, 20X1 March 10, 20X1 2,600 1,000 1,800 $20.00 $52,000 $22.00 $22,000 $23.00 $41,400 Sales January 10, 20X1 March 15, 20X1 3,000 2,000 Instructions (a) Assume the company uses a Perpetual Inventory System. Compute the value (S amount) of ending inventory and cost of goods sold at 3/31 under each of the following methods: (1) FIFO (2) Weighted Average (b) Assume the company uses a Periodic Inventory System. A physical count of the inventory indicated 2000 units remained as of 3/31. Compute the value (S amount) of cost of goods sold under the following method: (1) LIFO Problem #4 (7 %) Retail Inventory Method

Explanation / Answer

(a) computation of ending inventopry and cost of goods sold under perpetual system Under First in first out method Units rate per unit Total Opening Balance (01/january 20X1 1600 $18 28800 Add: Purchases Purchase on january 05 2600 $20 52000 Purchase on february 16,20X1 1000 $22 22000 Purchase on march 10,20X1 1800 $23 41400 7000 144200 less: Sales Sale on january 10 ,20X1 3000      1600 first at $18 1600 $18 28800 1400 units at $20 1400 $20 28000 sale on march 15,20x1 2000 Units from purchase of january 05, 2600-1400 1200 $20 24000 800 Units at $22 from frbruary 16 800 $22 17600 cost of goods sold 5000 98400 Ending Inventory 200 Units at $22 per unit 200 $22 4400 1800 Units at $23 per unit 1800 $23 41400 2000 45800 Ending inventory =$45800 Cost of goods sold =$98400 Under weighted average method Units rate per unit Total Opening Balance (01/january 20X1 1600 $18 28800 Add: Purchases Purchase on january 05 2600 $20 52000 balances 4200 $19.24 80800 Average rate per unit =80800/4200 =$19.24 Less: sales on jan 10 3000 $19.24 57720 Balances 1200 $19.24 23080 Add: purchases purchases on february 16 1000 $22 22000 Purchase on march 10 1800 $23 41400 balances 4000 $21.62 86480 Average rate per unit =86480/4000 =$21.62 Less: sales on march 15 2000 $21.62 43240 Ending Balnces 2000 $21.62 43240 Ending Balnces cost =$43240 Cost of goods sold =$57720+$43240 =$100960 (b) Cost of goods sold under LIFO method under Periodic method cost of goods sold Opening Value 28800 Add: Purchases ($52000+$22000+$41400) 115400 less: closing stock (2000 at $18 under LIFO) -36000 Cost of goods sold 108200

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