Question

Problem 5 (20 points) The following information is available for XYZ Company for the month of February. XYZ uses a periodic inventory system. Beginning inventory Purchase 1 Purchase 2 10 units at $5 per unit 30 units at $7 per unit 10 units at $9 per unit Total Cost $50 $210 $90 Available for Sale 50 units $350 Sales for the month were 35 units at $40 each. Compute Ending Inventory (in dollars) and Cost of Goods Sold (in dollars) and Gross Profit (in dollars) for the month using the following methods. Summarize your answers on the Inventory Answer Sheet on the next page. YOU MUST SHOW YOUR WORK. Specific Identification (ending inventory is made up of 3 units from the beginning inventory, 7 units from Purchase 1, and 5 units from Purchase 2) Weighted Average

Answer 1

Solution 1:

Computation of COGS and ending inventory - Specific identification
Particulars	Cost of goods available for sale			Cost of goods sold			Ending Inventory
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	10	$5.00	$50	7	$5.00	$35.00	3	$5.00	$15.00
Purchases:
Purchase 1	30	$7.00	$210	23	$7.00	$161.00	7	$7.00	$49.00
Purchase 2	10	$9.00	$90	5	$9.00	$45.00	5	$9.00	$45.00
Total	50		$350	35		$241.00	15		$109.00

Gross profit = sales - COGS = (35*$40) - $241 = $1,159

Solution 2:

Computation of COGS and ending inventory - Periodic Weighted Average cost method
Particulars	Cost of goods available for sale			Cost of goods sold - Average cost			Ending Inventory - Average cost
	Nos of units	Unit Cost	Cost of goods available for sale	Nos of units sold	Unit Cost	Cost of goods sold	Nos of units in ending inventory	Unit Cost	Ending inventory
Beginning inventory	10	$5.00	$50
Purchases:
Purchase 1	30	$7.00	$210
Purchase 2	10	$9.00	$90
Total	50	$7.00	$350.00	35	$7.00	$245	15	$7.00	$105

Gross profit = sales - COGS = (35*$40) - $245 = $1,155