EX 7-9 Periodic inventory by three methods; cost of merchandise sold

The units of an item available for sale during the year were as follows:

               Jan. 1              Inventory         21 units at $180
               Mar. 10          Purchase           29 units at $195
               Aug. 30          Purchase          10 units at $204
               Dec. 12           Purchase          15 units at $210

There are 24 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the inventory cost and the cost of merchandise sold
by three methods, presenting your answers in the following form:

                                                                                 Cost
Inventory Method                 Merchandise Inventory           Merchandise Sold
a. First-in, first-out                  $                                             $
b. Last-in, first-out
c. Average cost

Answer:
                                                                                        Cost  
                                                                     Merchandise       Merchandise
            Inventory Method                               Inventory                Sold  
a. FIFO.....................                                        $4,986                 $ 9,639
b. LIFO.....................                                         4,365                  10,260
c. Average cost.......                                           4,680                    9,945

 Cost of merchandise available for sale:
21 units at $180........................................................ $ 3,780
29 units at $195........................................................ 5,655
10 units at $204........................................................ 2,040  
15 units at $210........................................................  3,150  
75 units (at average cost of $195) .......................... $14,625

a. First-in, first-out:
Merchandise inventory:
15 units at $210........................................................ $3,150  
9 units at $204........................................................  1,836  
24 units..................................................................... $4,986
Merchandise sold:
$14,625 – $4,986....................................................... $9,639

b. Last-in, first-out:
Merchandise inventory:
21 units at $180........................................................ $3,780  
3 units at $195........................................................  585
24 units..................................................................... $4,365
Merchandise sold:
$14,625 – $4,365....................................................... $10,260

c. Average cost:
Merchandise inventory:
24 units at $195 ($14,625/75 units)......................... $4,680
Merchandise sold:
$14,625 – $4,680....................................................... $9,945

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