Kirtland Corporation uses a periodic inventory system. At the end of the annual

Question

Kirtland Corporation uses a periodic inventory system. At the end of the annual accounting period, December 31, the accounting records for the most popular item in inventory showed the following:

Required:

a. Compute the amount of goods available for sale.

b. Compute the amount of ending inventory and cost of goods sold at December 31, under Average cost, First-in, first-out, Last-in, first-out and Specific identification inventory costing methods. For Specific identification, assume that the first sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the second sale was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Transactions Units Unit Cost Beginning inventory, January 1 340 $3.00 Transactions during the year: a. Purchase, January 30 240 2.80 b. Purchase, May 1 400 4.00 c. Sale ($5 each) (100) d. Sale ($5 each) (640) First-In First-Out First-Out Identification Last-In, Specific Average Cost Ending inventory Cost of goods sold 806.20 $ 2,485.80 960 $ 720 $ 2,572

Explanation / Answer

a. Compute the amount of goods available for sale.

Cost of goods available for sale = (340*3+240*2.8+400*4) = $3292

b)  Compute the amount of ending inventory and cost of goods sold at December 31,

Average cost First in first out Last in first out Specific identification Ending inventory 3292/980*240 = $806.20 240*4 = $960 240*3 = $720 60*4+180*2.8 = $744 Cost of goods sold 3292/980*740 = $2485.80 3292-960 = $2332 3292-720 = $2575 (340*3+60*2.8+340*4) = $2548

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