COLLEGE ISION OF BUSINESS INCIPLES OF ACCOUNTING II e: Class: Date: TERM EXAM PA

Question

COLLEGE ISION OF BUSINESS INCIPLES OF ACCOUNTING II e: Class: Date: TERM EXAM PART II-FALL 2018 lem 1. Smart Tech's beginning inventory and purchases for the month of August were as follows: Cost per Unit $7.00 $7.50 $8.00 $8.75 #of Amount $ 4,200 3,000 4,000 2,625 $13, 825 Units Beginning inventory First purchase Second purchase Third purchase Number of units available for sale On hand Number of units sold 600 400 500 300 1,800 400 1.400 Required: Calculate the total amount to be assigned to cost of goods sold and ending inventory for Augu each of the following methods. a. First-in, first-out (FIFO) b. Last-in, first-out (LIFO) c. Weighted-average cost (round the unit price)

Explanation / Answer

Solution a:

Under FIFO 400 units in hand will consist of beginning inventory

Therefore ending inventory under LIFO = 400*$7 = $2,800

Cost of goods sold = Cost of goods available for sale - cost of ending inventory

= $13,825 - $3,425 = $10,400

Solution b:

Under FIFO 400 units in hand will consist of 300 units of thrid purchase and 100 units from second purchase.

Therefore ending inventory under FIFO = (300*$8.75) + (100*$8) = $3,425

Cost of goods sold = Cost of goods available for sale - cost of ending inventory

= $13,825 - $2,800 = $11,025

Solution c:

Wegighted average cost per unit = Cost of goods available for sale / nos of units available for sale

= $13,825 / 1800 = $7.68 per unit

Value of ending inventory = 400 * $7.68 = $3,072

Cost of goods sold = $13,825 - $3,072 = $10,753

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