Part A Amy\'s Art Shop kept all inventory and sales records on the basis of reta

Question

Part A

Amy's Art Shop kept all inventory and sales records on the basis of retail prices. It recorded purchases at cost and marked up its merchandise at 179% of cost. On January 1, its inventory of art was $266,000. During the year, its purchases were $323,000 and net sales were $756,000. What was its ending inventory?

$_______

Part B

The Sanberg Company had 337 units on hand at the beginning of the year, with a unit cost of $5.00. The number of units purchased and the unit cost and the number of units sold during the year are shown. What would be the value of the ending inventory of 364 units based on the (a) average cost; (b) first-in, first-out; and (c) last-in, first-out costing methods? Round interim calculations and final answers to two decimal places.

Date Units

Purchased Unit

Cost Units

Sold Units

on Hand Jan. 1 $5.00 337 Feb. 2 197 140 Apr. 16 196 $5.13 336 June 10 296 $5.21 632 Aug. 5 295 337 Oct. 12 248 $5.12 585 Nov. 27 221 364

Explanation / Answer

Part A

Beginning Inventory on Jan 1 = $266,000

Purchases During the Year = $323,000

Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold

Cost of Goods Sold = Net Sales/1.79 (Because Mark up is 179% of cost)

                             = $756,000/1.79 = $422346.37

Hence Ending Inventory = $266,000 + $323,000 - $422346.37 = $166653.63

Part B

Tota Units at the Beginning of the Year = 337

Purchases During The Year = 740

Units Sold During the Year = 713

Ending Units = 364

a. Average Cost Method

Total Cost of all the units (purchased + beginning inventory) = 337 * 5 + 196 * 5.13 + 296 * 5.21 + 248 * 5.12 = $5502.40

Average Cost per unit = Total Cost / No of Units = $5502.40 / 1077 = $5.11

Ending Inventory = Ending Units * Average Cost per unit = 364 * 5.11 = $1859.68

b. First In, First Out

This means that units purchased first will be sold first.

Ending Units = 364

Ending Units will comprise of 248 units purchased on Oct 12 and 116 units (out of total 296 units) purchased on 10 June

1) Total Cost of 248 units purchased on Oct 12 = 248 * 5.12 = $1269.76

2) Total Cost of 116 units purchased on June 10 = 116 * 5.21 = $604.36

Ending Inventory Based on FIFO method = 1) + 2) = $1874.12

b. Last In, First Out

This means that units purchased Last will be sold first.

Ending Units = 364

Ending Units will comprise of 337 units which on hand at the beginning of the year and 27 units (out of total 196 units) purchased on 16 April

1) Total Cost of 337 units n hand at the beginning of the year = 337 * 5 = $1685.00

2) Total Cost of 27 units purchased on 16 April = 27 * 5.13 = $138.51

Ending Inventory Based on LIFO method = 1) + 2) = $1823.51

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