Question

Beginning inventory, purchases, and sales for Meta-B1 are as follows:

July 1		Inventory	100 units at $400
12		Sale	70 units
23		Purchase	120 units at $450
26		Sale	110 units

a. Assuming a perpetual inventory system and using the weighted average method, determine the weighted average unit cost after the July 23 purchase.
$per unit

b. Assuming a perpetual inventory system and using the weighted average method, determine the cost of the merchandise sold on July 26.
$

c. Assuming a perpetual inventory system and using the weighted average method, determine the inventory on July 31.
$

Beginning inventory, purchases, and sales for Item ER27 are as follows:

January 1		Inventory	96 units @ $31
5		Sale	77 units
11		Purchase	107 units @ $33
21		Sale	90 units

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on January 21 and (b) the inventory on January 31.

a. Cost of merchandise sold on January 21	$
b. Inventory on January 31	$

Answer 1

Solution:

(Amount in $)

PART 1: As per Weighted Average Method

A: weighted average unit cost after the July 23 purchase is $ 424

B: The cost of the merchandise sold on July 26 is $ 46,649

C: The inventory on July 31is $16,960

Explanation:

Date	Purchase	Sale	Clsoing Stock
July 1 (Opening Inventory)	-	-	$ 40,000 (100 units *$400)
July 12	-	$28,000 (70 units *$400)	$12,000 (30 Units * $400)
July 23	$51,600 (120 units)	-	$63,600 {( 51,600+12,000)/150 units ) = 424 per units
July 26	-	$46,640 (110 units *424)	$16,960 (40 Units *$424)

PART 2. AS per LIFO Method

A: Cost of merchandise sold on January 21is $2,970

B: Cost of Inventory on January 31 is $1,150

Explanation:

Date	Purchase	Sale	Clsoing Stock
Jan 1 (Opening inventory)			$2,976 (96 Units * $31)
5 Jan	-	$ 2,387 (77 units * $31)	$589 (19 Units * $31)
Jan 11	$3,531(107 units * $33)	-	$4,120( 107 units @ 33 + 19 units @31)
Jan 21	-	$2,970 (90 Units @ 33)	$1,150 (17 units @ 33 + 19 units @31)

Note:

1. Weighted Average cost Method calculated with helo of following formula

= Cost of Goods Avialable for sale / Number of units available for sale.

2. Last in First Out method most recent purchase is used to sell first. On there other hand there is method called FIFO First in First Out where first purchase is used first to sell goods.