Question

Wholesaler Entity (Wholesaler) is a supplier for many retail companies. Wholesaler uses a perpetual inventory system and the FIFO cost formula.   The table below represents all inventory-related transactions for a certain product during the month of January. Assuming Wholesaler had 300 units in beginning inventory with a total cost of $1,500.

Date	Transaction	Units	Unit cost
3 January	Sold	100
7 January	Purchased	150	6
15 January	Sold	200
21 January	Purchased	500	7
27 January	Sold	150

Calculate the value of ending inventory and cost of goods sold for January. ​

Assume the same facts as above except that Wholesaler uses a periodic inventory system and the weighted average cost formula. Calculate the value of ending inventory and cost of goods sold for January.

Assume the same facts as above except that Wholesaler uses a perpetual inventory system. Calculate the value of ending inventory and cost of goods sold for January.

Answer 1

Weighted average cost per unit = Cost of units available for sale / Number of units available for sale

= [$1,500 + (150*$6) + (500*$7)] / (300+150+500)

= $5,900 / 950

= $6.21

Units available for sale = 300 + 150 + 500 = 950

Sales in units = 100 + 200 + 150 = 450

Ending inventory = Units available for sale - Sales in units

= 950 - 450

= 500

Value of ending inventory = 500 units * $6.21 = $3,105

Cost of goods sold = 450 units * $6.21 = $2,794.5

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Date	Particulars	Units & Unit cost	Inventory cost	Inventory units	Average cost
1 Jan.	Beginning inventory	300*$5 = $1,500	$1,500	300	$5($1,500/300)
3 Jan.	Sold	100*$5 = $500	$1,000 ($1,500-$500)	200	$5 ($1,000/200)
7 Jan.	Purchased	150*$6 = $900	$1,900 ($1,000+$900)	350 (200+150)	$5.43 ($1,900/350)
15 Jan.	Sold	200*$5.43 = $1,086	$814 ($1,900-$1,086)	150 (350-200)	5.43 ($814/150)
21 Jan.	Purchases	500*$7 = $3,500	$4,314 ($814+$3,500)	650 (150+500)	6.64 ($4,314/650)
27 Jan.	Sold	150*$6.64 = $996	$3,318 ($4,314-$996)	500 (650-150)	6.64 ($3,318/500)

Ending inventory = 500 units * $6.64 per unit = $3,320

Cost of goods sold = $500 + $1,086 + $996 = $2,582