Altira Corporation uses a perpetual inventory system. The following transactions

Question

Altira Corporation uses a perpetual inventory system. The following transactions affected its merchandise inventory during the month of August 2016:

Aug.1 Inventory on hand – 2,000 units, cost $6.10 each .

Aug. 8. Purchased 10,000 units for $5.50 each        

Aug. 14. Sold 8,000 units for $12 each                      

Aug. 18. Purchased 6,000 units for $5 each             

Aug. 25. Sold 7,000 units for $11 each                     

Aug. 31. Inventory on hand – 3,000 units                 

Required:

Determine the inventory balance Altira would report in its August 31, 2016, balance sheet and the cost of goods sold it would report in its August 2016 income statement using each of the following cost flow methods: (Round "Average Cost per Unit" to 2 decimal places.)

A. Perpetual FIFO  

1. Cost of Goods Available for Sale ( Perpetual FIFO # of units with date, Cost per unit, Cost of Goods Available for Sale)

2. Cost of Goods Sold - Aug. 14 ( Perpetual FIFO # of units sold, Cost per unit, Cost of Goods Sold)

3. Cost of Goods Sold - Aug.25 ( Perpetual FIFO # of units sold, Cost per unit, Cost of Goods Sold)

4. Inventory Balance (# of units in ending iinventory, Cost per unit, Ending Inventory)

B. Perpetual LIFO  

1. Cost of Goods Available for Sale ( Perpetual LIFO # of units with date, Cost per unit, Cost of Goods Available for Sale)

2. Cost of Goods Sold - Aug. 14 ( Perpetual LIFO # of units sold, Cost per unit, Cost of Goods Sold)

3. Cost of Goods Sold - Aug.25 ( Perpetual LIFO # of units sold, Cost per unit, Cost of Goods Sold)

4. Inventory Balance (# of units in ending iinventory, Cost per unit, Ending Inventory)

C. Perpetual Average

Perpetual Average Inventory on hand Cost of Goods Sold Inventory Balance # of units Cost per unit Inventory Value # of units sold Avg.Cost per unit Cost of Goods Sold # of units in ending inventory Cost per unit Ending inventory Beginning Inventory Purchase - August 8 Subtotal Average Cost Sale - August 14 Subtotal Average Cost Purchase - August 18 Subtotal Average Cost Sale - August 25 Total 0 0 0 0

Explanation / Answer

As per FIFO:

Aug 14:

cost of goods avilable for sale=2,000*$6.1+10,000*$5.5=$67,200

cost of goods sold=2,000*$6.1+6,000*$5.5=$45,200

Aug 25

cost of goods avilable for sale=4,000*$5.5+6,000*$5=$52,000

cost of goods sold=4,000*$5.5+3,000*$5=$37,000

Value of inventory=3,000*$5=$15,000

As per Average cost method:

Aug 14:

cost of goods avilable for sale=2,000*$6.1+10,000*$5.5=$67,200

cost per unit avilable for sale=$67,200/12,000=$5.6

cost of goods sold=8,000*$5.6=$44,800

Aug 25

cost of goods avilable for sale=4,000*$5.6+6,000*$5=$52,400

cost good per unit avilable for sale=$52,400/10,000=$5.24

cost of goods sold=7,000*$5.24=$36,680

Value of inventory=3,000*$5.24=$15,720

As per LIFO:

Aug 14:

cost of goods avilable for sale=2,000*$6.1+10,000*$5.5=$67,200

cost of goods sold=8,000*$5.5=$44,000

Aug 25

cost of goods avilable for sale=2,000*$6.1+2,000*$5.5+6,000*$5=$53,200

cost of goods sold=6,000*$5+1,000*$5.5=$35,500

Value of inventory=1,000*$5.5+2,000*$6.1=$17,700

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