Question

Country sporting goods started april with an inventory of 8 sets of gold clubs:

Country Sporting Goods started April with an inventory of 8 sets of golf clubs that cost a total of $1,192. During April, Country purchased 20 sets of clubs for $3,180. At the end of the month, Country had four sets of golf clubs on hand. The store manager must select an inventory costing method, and he asks you to tell him both cost of goods sold and ending inventory under these three accounting methods, assuming the periodic inventory system is used: 1a. Weighted average cost 1b. FIFO 2. If the store manager wants the most current cost for ending inventory, which method should he choose? Determine the cost of goods sold and ending inventory amounts under the two methods. (Round your interim calculations to the nearest cent. Round your final answers to the nearest dollar.) 1a Average Cost 1b. FIFO Cost Cost of goods sold Ending inventory 2. If the store manager wants the most current cost for ending inventory, which method should he choose? The store manager should choose because the cost of inventory is V. and therefore, results in the most current cost for ending inventory LIFO FIFO Specific identification Weighted average

Answer 1

Correct Answer:

	FIFO	Weighted Average
Cost of Goods Sold	$                     3,736	$                         3,747
Ending Inventory	$                        636	$                             625

                               

The store manager should FIFO because the cost of inventory is increasing, and therefore, results in the most current cost for ending inventory.

Working:

Cost of Goods Available for sale
	Units	Cost per unit	value
Beginning Inventory	8	$                     149.0	$                     1,192.0
Purchases	20	$                     159.0	$                     3,180.0
Total	28		$                         4,372

	FIFO
A	Total Units Available for sale			28		$                  4,372
	Units Sold			24
	Ending Inventory Units			4
	Valuation
	Cost of Goods Sold		8		$                       149.00	$            1,192.00
			16		$                       159.00	$                  2,544
B	Cost of Goods Sold		24	units		$                  3,736
A-B	Ending Inventory		4	units		$                  636.0

	Weighted Average
A	Total Units Available for sale			28		$            4,372.00
	Units Sold			24
	Ending Inventory Units			4
	Valuation
	Cost of Goods Sold		24		$                  156.1429	$            3,747.43
B	Cost of Goods Sold		24	units		$            3,747.43
A-B	Ending Inventory		4	units		$               624.57

Weighted Average Cost Per unit
Units		(A)	28
Total Cost		(B)	$               4,372.00
Average Cost		(C=B/A)	$                  156.14

End of answer.

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