Question

In: Accounting

Surf Deals had the following inventory (surfboards) information available for June and records their inventory using...

Surf Deals had the following inventory (surfboards) information available for June and records their inventory using the periodic inventory method.

Date          Transaction                                            Units                      Unit Cost

June 1       Beginning inventory                                  100                             $200

June 2       Purchase                                                 100                             $220

June 5       Sale @ $350 per unit                                (75)

June 18     Purchase                                                 200                             $225

June 25     Purchase                                                 100                             $230

June 29     Sale @ $360 per unit                                (200)

                                                           

  1. Assume that the company uses the FIFO inventory method. Develop an inventory worksheet.                                                                                                                                     

  1. What is the total dollar value of the ending inventory on June 30 and the Cost of Goods Sold for June.                                                                                                                                             

                   Inventory:     ___________                                 Cost of Goods Sold:     ___________

  1. Assume that the company uses the periodic approach and Weighted Average inventory method. What is the total dollar value of the ending inventory on June 30 and its Cost of Goods Sold for June?                                                                                                                            

          Inventory:     ___________                   Cost of Goods Sold:     ___________

          

  1. Which method would cause Surf Deals to have the highest gross margin? Why?               (1 Mark)

Solutions

Expert Solution

Solution: A
FIFO METHDO
COST OF GOODS AVAILABLE FOR SALE COST OF GOODS SOLD ENDING INVENTORY
Date Particulars No. of Units Cost Per unit Total No. of Units Cost Per unit Cost of Goods Sold No. of Units Cost Per unit Ending inventory
June, 01 Beginning Balance 100 $           200.00 $20,000 100 $      200.00 $20,000
June, 02 Purchases 100 $           220.00 $22,000 100 $      220.00 $22,000
June, 08 Purchases 200 $           225.00 $45,000 75 $      225.00 $16,875 125 $      225.00 $28,125
June, 25 Purchases 100 $           230.00 $23,000 100 $      230.00 $23,000
Total Goods Available For sale                        500 $1,10,000                    275 $58,875                    225 $51,125
Weighted Average Cost
COST OF GOODS AVAILABLE FOR SALE COST OF GOODS SOLD ENDING INVENTORY
Date Particulars No. of Units Cost Per unit Total No. of Units Cost Per unit Cost of Goods Sold No. of Units Cost Per unit Ending inventory
June, 01 Beginning Balance 100 $           200.00 $20,000
June, 02 Purchases 100 $           220.00 $22,000
June, 08 Purchases 200 $           225.00 $45,000
June, 25 Purchases 100 $           230.00 $23,000
Total Goods Available For sale                        500 $220.00 $1,10,000                    275 $220.00 $60,500                    225 $220.00 $49,500
Answer = A -1
Ending Inventory Cost of Goods Sold
FIFO $51,125 $58,875
Answer = A -2
Weighted average Cost $49,500 $60,500
Answer = A -3

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