Mojo Industries tracks the number of units purchased and sold throughout each ac

Question

Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system Assume its accounting records provided the following information at the end of the accounting period January 31. The inventory's selling price is $8 per unit. Transactions Inventory, January 1 Sale, January 10 Purchase, January 12 Sale, January 17 Purchase, January 26 Total Cost Units 200 Unit Cost $2.00 2.50 3.50 250 (100) 50 $400 625 175 Assuming that for Specific identification method (item 1d) the January 10 sale was from the beginning inventory and the January 17 sale was from the January 12 purchase Required 1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods: (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.) Cost of Goods Sold Amount of Goods Ending Inventory a. Weighted average cost$ b. First-in, first-out C. Last-in, first-out d. Specific identification Available for Sale 1,200 1,200 1,200 1,200

Explanation / Answer

1 a) Weighted Average cost

Units available for sale = 200 units+250 units+50 units = 500 units

Amount of goods available for sale = $400+$625+$175 = $1,200

Weighted Average cost per unit = $1,200/500 units = $2.40 per unit

Units sold = 140 units+100 units = 240 units

Ending Inventory = 500 units - 240 units = 260 units

Cost of Ending Inventory = 260 units*$2.40 per unit = $624

Cost of goods sold = 240 units*$2.40 per unit = $576

b) First in, First out

As per FIFO method, the ending inventory of 260 units will consist of 50 units purchased on jan 26 at $3.50 per unit and remaining 210 units purchased on jan 12 at $2.50 per unit.

Ending Inventory = (50 units*$3.50)+(210 units*$2.50)

= $175+$525 = $700

The goods sold will be from opening inventory of 200 units at $2.00 per unit and remaining 40 units from purchase made on jan 12 at $2.50 per unit.

Cost of goods sold = (200 units*$2.00)+(40 units*$2.50)

= $400+$100 = $500

c) Last in, First Out

As per LIFO method, the goods sold on Jan 10 will be from opening inventory of 140 units at $2.00 per unit and goods sold on Jan 17 will be from purchase made on Jan 12 of 100 units at $2.50 per unit.

Cost of goods sold = (140 units*$2.00)+(100 units*$2.50)

= $280+$250 = $530

The ending inventory of 260 units will consist of 50 units purchased on jan 26 at $3.50 per unit and 150 units (250-100) purchased on Jan 12 at $2.50 remaining 60 units from opening inventory at $2.00 per unit.

Ending Inventory = (50 units*$3.50)+(150 units*$2.50)+(60 units*$2.00)

= $175+$375+$120 = $670

d) Specific Identification

The cost of goods sold and Ending inventory as per specific identification method will be same as calculated in LIFO method because the goods sold are same as per LIFO method

Cost of goods sold =(140 units*$2.00)+(100 units*$2.50)

= $280+$250 = $530

Ending Inventory = (50 units*$3.50)+(150 units*$2.50)+(60 units*$2.00)

= $175+$375+$120 = $670

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