Question

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions Units Sold at Retail Units Acquired at Cost 620 units@ $45 per unit 310 units @ $42 per unit 120 units @ $30 per unit Date Activities Jan. 1 Beginning inventory Feb. 10 Purchase Mar. 13 Purchase Mar. 15 Sales Aug. 21 Purchase Sept. 5 Purchase Sept. 10 Sales Totals 770 units@ $85 per unit 190 units @ $50 per unit 520 units @ $48 per unit 710 units @ $85 per unit 1,480 units 1,760 units Required: 1. Compute cost of goods available for sale and the number of units available for sale. Cost of goods available for sale Number of units available for sale units 2. Compute the number of units in ending inventory. Ending inventory units 3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (C) weighted average, and (d) specific identification. For specific identification, units sold consist of 620 units from beginning inventory, 210 from the February 10 purchase, 120 from the March 13 purchase, 140 from the August 21 purchase, and 390 from the September 5 purchase.

Answer 1

Ans. 1 Units 620 Available for Sale Cost per unit $45.00 Total cost $ 27,900 Beginning inventory Purchases: 10-Feb 13-Mar 21-Aug 05-Sep Total Number & Cost of goods available for sale 310 120 190 520 1760 $42.00 $30.00 $50.00 $48.00 $13,020 $3,600 $9,500 $24,960 $78,980 Ans. 2 Ending inventory units = Units available for sale - Total units sold 1,760 - 1,480 280 units Ans. 3 Methods FIFO LIFO Weighted average Specific identification Ending inventory $13,440 $12,600 $13,104 $12,940 *Calculations:

Ans. 3 a Perpetual FIFO: Cost of goods sold Rate Quantity Total cost Date 01-Jan 10-Feb Purchase Quantity Rate 620 $45.00 310 $42.00 Total cost $27,900 $13,020 Quantity 620 620 310 Balance Rate $45.00 $45.00 $42.00 $45.00 $42.00 $30.00 Total cost $27,900 $ 27,900 $13,020 $27,900 $13,020 $3,600 13-Mar 120 $30.00 $3,600 120 15-Mar 620 $45.00 $42.00 $27,900 $6,300 150 21-Aug 190 $50.00 $9,500 160 120 160 120 190 $42.00 $30.00 $42.00 $30.00 $50.00 $42.00 $30.00 $50.00 $48.00 $6,720 $3,600 $6,720 $3,600 $9,500 $6,720 $3,600 $9,500 $24,960 05-Sep 520 $48.00 $ 24,960 160 120 190 520 10-Sep 160 120 190 240 $42.00 $30.00 $50.00 $48.00 $6,720 $3,600 $9,500 $11,520 280 $48.00 $13,440 Ending inventory $13,440 Total Cost of goods sold $65,540 *In FIFO method the units that have purchased first (earliest), are released the first one and the ending inventory units remain from the last (recent) purchases.

Ans. 3 b LIFO: Cost of goods sold Rate Quantity Total cost Date 01-Jan 10-Feb Purchase Quantity 620 310 Rate $45.00 $42.00 Total cost $ 27,900 $13,020 Quantity 620 620 310 620 310 120 Balance Rate $45.00 $45.00 $42.00 $45.00 $42.00 $30.00 Total cost $27,900 $27,900 $13,020 $27,900 $13,020 $3,600 13-Mar 120 $30.00 $3,600 15-Mar 120 310 340 $30.00 $42.00 $45.00 $3,600 $13,020 $15,300 21-Aug 190 $50.00 $9,500 280 280 190 280 190 520 $45.00 $45.00 $50.00 $45.00 $50.00 $48.00 $12,600 $12,600 $9,500 $12,600 $9,500 $24,960 05-Sep 520 $48.00 $24,960 10-Sep 520 190 $48.00 $50.00 $24,960 $9,500 280 $45.00 $12,600 Total Cost of goods sold $66,380 Ending inventory $12,600 *In LIFO method the units that have purchased last, are released the first one and the ending inventory units remain from the first purchases.

Ans. 3C Cost of goods sold Rate Quantity Total cost Weighted Average Purchase Date Quantity 01-Jan 620 10-Feb 310 13-Mar 120 15- Mar 21-Aug 190 05-Sep 520 10-Sep Rate $45.00 $42.00 $30.00 Total cost $27,900 $13,020 $3,600 Balance Rate $45.00 $44.00 $42.40 $42.40 $45.47 $46.80 $46.80 Quantity 620 930 1050 280 470 990 280 $42.40 770 $32,648 Total cost $27,900 $40,920 $44,520 $11,872 21372 46332 $13,104 $50.00 $48.00 $9,500 $24,960 710 $46.80 $33,228 Total Cost of goods sold $65,876 Ending inventory $13,104 *Weighted average rate is calculated by using the formula of (Total available balance / Total units available). Ans. 3 d Cost Specific Identification: Available for sale Purchase date Activity Units 01-Jan Beginning inventory 620 10-Feb Purchases 310 13-Mar Purchases 120 21-Aug Purchases 190 05-Sep Purchases 520 Total Ending inventory units = Total units available - Total units sold Rate $45.00 $42.00 $30.00 $50.00 $48.00 Cost $ 27,900 $13,020 $3,600 $9,500 $24,960 Cost of goods sold Units Rate 620 $45.00 210 $42.00 120 $30.00 140 $50.00 390 $48.00 Cost of goods sold Cost $27,900 $8,820 $3,600 $7,000 $18,720 $66,040 Ending inventory Units Rate $45.00 100 $42.00 $30.00 50 $50.00 130 $48.00 Ending inventory O $4,200 $0 $2,500 $6,240 $12,940 Actinto lindo

Ending inventory (a-b) 0 100 Purchase date 01-Jan 10-Feb 13-Mar 21-Aug 05-Sep Units available (a) 620 310 120 190 520 Sold units (b) 620 210 120 140 390 130