Question

Part I. Swello, Ine, sells down pillows. The following schedule summarizes the activity in Swello's inventory account during the month of January: Beginning inventory Purchase 1/8 Purchase 1/10 Purchase 1/14 100 units @ $18.00 each 500 units à $20,00 each 100 units @ $24.00 each 200 units @ $26.00 each Sales (all after 1/15) 650 units as following: 100 from Beginning inventory 300 from 1/8 purchase 80 from 1/10 purchase 170 from 1/14 purchase Show your work and circle your final answer. 1. How many units are in ending inventory at the end of January? 2. Calculate the cost of ending inventory for Swello, Inc, under Specific Identification: 3. Using the Weighted Average method: • What is the weighted average cost of pillow?-round per unit costs to the nearest penny • Calculate the cost of ending inventory under the Weighted average method 4. Calculate cost of goods sold for Swello under FIFO: 5. If the pillows sold for $50 cach, calculate gross margin, assuming use of FIFO.

Answer 1

Requirement 1 Computation of Ending inventory Beginning Inventory Add: Purchases Goods available for sale Less : Sales Ending Inventory Units 100 800 900 -650 250 Units

Requirement 2 Under Specific identification Method: Date Activity Beginning Inventory 08-Jan Purchases 10-Jan Purchases 14-Jan Purchases Cost of Goods sold NO of Units Unit cost NO of Units Per Unit Total 100 $ 18.00 100 $ 18.00 $ 1,800.00 500 $ 20.00 300 $20.00 $ 6,000.00 100 $ 24.00 80 $24.00 $ 1,920.00 200 $ 26.00 170 $26.00 $ 4,420.00 Ending Inventory NO of Units Per Unit Total 0 $ 18.00 $ 200 $20.00 $ 4,000.00 20 $24.00 $ 480.00 30 $26.00 $ 780.00 250 $ 5,260.00

Requirement 3 Using Weighted Average Method Date Activity Beginning Inventory 08-Jan Purchases 10-Jan Purchases 14-Jan Purchases NO of Units Unit cost Total Cost 100 $ 18.00 $ 1,800.00 500 $ 20.00 $10,000.00 100 $ 24.00 $ 2,400.00 200 $ 26.00 $ 5,200.00 900 $ 19,400.00 Weighted Avg cost ofone pillow = $19400 / 900 units 21.6 Cost of Ending Inventory = 250 units * $21.6 $ 5,400.00 Note: Rounded off to nearest penny i.e., $21.6 If wrong take it as $21.56 it is upto you.

Requirement 4 Date Unit Transaction 01-Jan Beginning 08-Jan Purchase 10-Jan Purchase 14-Jan Purchase Price 100 $ 500 $ 100 $ 200 $ 18.00 20.00 24.00 26.00 Total cost $ 1,800.00 $ 10,000.00 $ 2,400.00 $ 5,200.00 Cost of goods aviable for sale $ 19,400.00 Note : FIFO method assumes that the goods purchased First will be sold first So The ending Inventory conists of goods which are purchased last Less : Ending Inventory 250 units consists of : 200 units @ $ 26 50 units @ $ 24 Ending inventory. $ 5,200.00 $ 1,200.00 $ 6,400.00 Cost of goods sold = Cost of goods available for sale - Ending inventory $ 13,000.00 Requirement 5 650 units @ $50 $ Sales Less : Cost of goods sold Gross margin 32,500.00 (13,000.00) 19,500.00