Question

Towing Company employs a periodic inventory system. At July 1, Towing Company had 7,100 units of inventory on hand, with each unit having a cost of $13.30.

During July, Towing Company recorded the following purchases of inventory:

July 11 3,900 units purchased at ?????? per unit

July 19 2,800 units purchased at ?????? per unit

July 22 6,700 units purchased at $16.30 per unit During July,

Towing Company sold 10,100 units of inventory to its customers. Using FIFO, Towing Company calculated its ending inventory at July 31 to be equal to $155,660. Using LIFO, Towing Company calculated its ending inventory at July 31 to be equal to $143,600.

Calculate the dollar amount of ending inventory shown on Towing Company's July 31 balance sheet using the weighted average method.

Answer 1

Solution:

Total units available for sale = 7100 + 3900 + 2800 + 6700 = 20500 units

Units sold = 10100

Units in ending inventory = 20500 - 10100 = 10400 units

Ending inventory under LIFO consist of 7100 from beginning inventory and 3300 from purchased on July 11

Let per unit cost on july 11 purhcase is X per unit

Now

(7100*$13.30) + (3300 * X) = $143,600

3300 X = $49,170

X = $14.90 per unit

Ending inventory as per FIFO = $155,660

Ending inventory will consist of 6700 units purhcased on Jul 22, 2800 units purhcase on July 19, 900 units purchased on July 11

Let cost per unit for July 19 purchase = $Y per unit

Now

(6700*$16.30) + (2800*$Y) + (900*$14.90) = $155,660

= $109,210 + 2800 Y + $13,410 = $155,660

2800 Y = $33,040

Y = $11.80 per unit

Total cost of goods available for sale = (7100 * $13.30) + (3900 * $14.90) + (2800*$11.80) + (6700*$16.30)

= $294,790

Average cost per unit = $294,790 / 20500 = $14.38 per unit

Inventory to be shown on July 31 balance sheet using weighted average method = 10400 * $14.38 = $149,552