Acme Corporation sells gadgets and uses the perpetual inventory system. During t

Question

Acme Corporation sells gadgets and uses the perpetual inventory system. During the month of January 2018, the number of gadgets purchased and sold was as follows: Sold Unit Total Balance in inventory: Unit | Total Purchased Date Unit Total UnitscostUnitscostUnitscost Jan. 1 100 3 150$1 8 250$2 10 15-1 35001 s3-1 20 27 450$1 | 200*42 | 0 400**, Assume the January 10 units were sold on account for $4 each, and the January 20 units were sold on account for $6 each. for specific identification, sold 50 units of opening inventory and 150 units of purchase from Jan 8th **for specific identification, sold 100 units of purchase Jan 3rd and 300 units from purchase Jan 15th Required: 1. Complete the inventory record card, and calculate cost of goods sold and the cost of ending inventory under each of the following inventory cost flow assumptions: a. FIFO b. Specific identification c. weighted average. 2. Prepare the journal entries required to record purchases and sales using the FIFO inventory cost flow assumption. Calculate the sum of cost of goods sold and ending inventory balances under each of the three assumptions. Explain the results. 3.

Explanation / Answer

1.

2. Journal entries: FIFO

3.

The sum of the cost of goods sold and ending inventory under each of the three assumptions is the same. This is because:

Beginning inventory balance + Purchases = Cost of goods available for sale

Cost of goods available for sale = Cost of goods sold + Ending inventory balance

No matter which cost flow assumption is used, the cost of goods sold and ending inventory together must equal the cost of goods available for sale which is the same irrespective of which method is followed.

Cost of goods sold $ Ending inventory $ a. FIFO 1050 1200 b. Specific identification 1350 900 c. Weighted average 1224 1026

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