Inventory Costing Methods-Perpetual Method The following information is for the
ID: 2565106 • Letter: I
Question
Inventory Costing Methods-Perpetual Method The following information is for the Bloom Company; the company sells just one product: Units Unit Cost Beginning Inventory an. 1 200 Feb. 11 500 May 18 400 Oct. 23 100 March 1 400 July 1 380 $10 14 16 18 Purchases: Sales: Calculate the value of ending inventory and cost of goods sold using the perpetual method and (a) first-in, first-out, (b) last-in, first-out, and (c) the weighted- average cost methods Do not round until your final answers. Round your final answers to the nearest dollar A. First-in, First-out: Ending Inventory Cost of goods sold B. Last-in, first-out Less: Ending Inventory $ Cost of goods sold C. Weighted Average Less: Ending Inventory$ Cost of goods soldExplanation / Answer
Solution:
Under perpetual system, inventory is updated after each transaction whether sale or purchase of units.
A) First in First out method
Under FIFO method the oldest units are issued first.
Perpetual FIFO:
Goods Purchased
Cost of Goods Sold
Inventory Balance
# of units
Unit Cost
Cost per unit
# of units
Cost per unit
Cost of goods sold
# of units
Cost per unit
Inventory Balance
1/1 Beginning
200
$10.00
$2,000
Feb 11 Purchases
500
$14.00
$7,000.00
200
$10.00
$2,000
500
$14.00
$7,000
700
$9,000
Sales March 1
200
$10.00
$2,000
200
$14.00
$2,800
300
$14.00
$4,200
400
$4,800
300
$4,200
May 18 Purchases
400
$16.00
$6,400.00
300
$14.00
$4,200
400
$16.00
$6,400
700
$10,600
Sales July 1
300
$14.00
$4,200
80
$16.00
$1,280
320
$16.00
$5,120
380
$5,480
320
$5,120
Oct 23 Purchases
100
$18.00
$1,800.00
320
$16.00
$5,120
100
$18.00
$1,800
$420
$6,920
TOTAL
780
$10,280
Ending Inventory = $6,920
Cost of Goods Sold = $10,280
B) Last in First out method
LIFO method says the earliest purchased units are issued or sold first.
Perpetual LIFO
Goods Purchased
Cost of Goods Sold
Inventory Balance
# of units
Unit Cost
Cost per unit
# of units
Cost per unit
Cost of goods sold
# of units
Cost per unit
Inventory Balance
1/1 Beginning
200
$10.00
$2,000
Feb 11 Purchases
500
$14.00
$7,000.00
200
$10.00
$2,000
500
$14.00
$7,000
700
$9,000
Sales March 1
0
$0.00
$0
200
$10.00
$2,000
400
$14.00
$5,600
100
$14.00
$1,400
400
$5,600
300
$3,400
May 18 Purchases
400
$16.00
$6,400.00
200
$10.00
$2,000
100
$14.00
$1,400
400
$16.00
$6,400
$700
$9,800
Sales July 1
380
$16.00
$6,080
200
$10.00
$2,000
380
$6,080
100
$14.00
$1,400
20
$16.00
$320
$3,720
Oct 23 Purchases
100
$18.00
$1,800.00
200
$10.00
$2,000
100
$14.00
$1,400
20
$16.00
$320
100
$18.00
$1,800
420
$5,520
$11,680
Ending Inventory = $5,520
Cost of Goods Sold = $11,680
c) Weighted Average Method
Under this method units are sold at average cost. Average Cost per unit is calculated after each purchase transaction and then this average cost per unit is applied to sold units to calculate the cost of goods sold.
Average Cost per Unit = Cost of Goods Available in Inventory / Number of Units available in inventory
Perpetual Weighted Average
Goods Purchased
Cost of Goods Sold
Inventory Balance
# of units
Unit Cost
Cost per unit
# of units
Cost per unit
Cost of goods sold
Total Cost of Goods (a)
Total Available Units (b)
Unit Average Cost (a/b)
1/1 Beginning
$2,000.00
200
$10.00
Feb 11 Purchases
500
$14.00
$7,000.00
$2,000.00
200
$7,000.00
500
$9,000.00
700
$12.86
Sales March 1
400
$12.86
$5,143
$3,857.14
300
$12.86
May 18 Purchases
400
$16.00
$6,400.00
$3,857.14
300
$6,400.00
400
$10,257.14
700
$14.65
Sales July 1
380
$14.65
$5,568
$4,688.98
320
$14.65
Oct 23 Purchases
100
$18.00
$1,800.00
$4,688.98
320
$1,800.00
100
$6,489
420
$15.45
$10,711
Ending Inventory = $6,489
Cost of Goods Sold = $10,711
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Perpetual FIFO:
Goods Purchased
Cost of Goods Sold
Inventory Balance
# of units
Unit Cost
Cost per unit
# of units
Cost per unit
Cost of goods sold
# of units
Cost per unit
Inventory Balance
1/1 Beginning
200
$10.00
$2,000
Feb 11 Purchases
500
$14.00
$7,000.00
200
$10.00
$2,000
500
$14.00
$7,000
700
$9,000
Sales March 1
200
$10.00
$2,000
200
$14.00
$2,800
300
$14.00
$4,200
400
$4,800
300
$4,200
May 18 Purchases
400
$16.00
$6,400.00
300
$14.00
$4,200
400
$16.00
$6,400
700
$10,600
Sales July 1
300
$14.00
$4,200
80
$16.00
$1,280
320
$16.00
$5,120
380
$5,480
320
$5,120
Oct 23 Purchases
100
$18.00
$1,800.00
320
$16.00
$5,120
100
$18.00
$1,800
$420
$6,920
TOTAL
780
$10,280
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