Samuelson and Messenger (S&M) began 2018 with 300 units of its one product. Thes

Question

Samuelson and Messenger (S&M) began 2018 with 300 units of its one product. These units were purchased near the end of 2017 for $22 each. During the month of January, 150 units were purchased on January 8 for $25 each and another 260 units were purchased on January 19 for $27 each. Sales of 135 units and 170 units were made on January 10 and January 25, respectively. There were 405 units on hand at the end of the month. S&M uses a perpetual inventory system Required: 1. Complete the below table to calculate ending inventory and cost of goods sold for January using FIFO method 2. Complete the below table to calculate ending inventory and cost of goods sold for January using average cost method.

Explanation / Answer

Ans.1 Perpetual FIFO: Cost of goods available for sale Cost of Goods Sold Inventory Balance Date Transactions No. of Cost per Cost of goods No. of Cost per Cost of No. of units in Cost per Ending units unit available for sale units sold unit goods sold ending inventory unit Inventory 1-Jan Beg. Inventory 300 22 6600 300 22 6600 8-Jan Purchase 150 25 3750 300 22 6600 150 25 3750 10-Jan Sales 135 22 2970 165 22 3630 150 25 3750 19-Jan Purchase 260 27 7020 165 22 3630 150 25 3750 260 27 7020 25-Jan Sales 165 22 3630 5 25 125 145 25 3625 260 27 7020 405 10645 Total Cost of goods available for sale 17370 Cost of goods sold 6725 Ending Inventory 10645 Ans.2 Perpetual Average Inventory on hand Cost of goods sold No. of units Cost per unit Inventory value No. of units sold Avg. cost per unit COGS Beginning Inventory 300 22 6600 Purchase- jan.8 150 25 3750 Subtotal avg. cost 450 23 10350 Sales-jan.10 -135 23 -3105 135 23 3105 Subtotal avg. cost 315 23 7245 Purchase- jan.19 260 27 7020 Subtotal avg. cost 575 24.81 14265 Sales-jan.25 -170 24.81 -4218 170 24.81 4218 Subtotal avg. cost 405 24.81 10047 Subtotal avgerage cost per unit after Jan.19 purchase = (7245+7020) / (315+260) 24.81 *Average unit cost of goods sold will remain same as the previous transaction.

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