Question

1. Callum Pty Ltd had the following transactions occur during May.

   May 1	Inventory on hand was 20 units at a cost of $10 per unit
   May 5	Purchased 20 units for cash for $17 per unit
   May 10	Sold 35 units for cash at a selling price of $20 per unit
   May 31	Inventory on hand was 5 units

   (i) Calculate the cost of sales in May using the average cost inventory costing method

   (ii) Prepare the journal entries to record the two transactions in May using the average cost perpetual inventory method

Answer 1

Ans i

Callum Pty Ltd
Transactions	Unit	Rate	Inventory Cost $	Sales Price/Unit	Sales Revenue
Opening Balance on May 1	20	$           10.00	$                              200.00
May 5. Purchase	20	$           17.00	$                              340.00
Total Inventory available for sale at average cost	40	$           13.50	$                              540.00
May 10. sold 35 units @$20 per unit	35	$           13.50	$                              472.50	$                  20.00	$             700.00
May 31. Ending Balance	5	$           13.50	$                                67.50

Ans ii

	Journal entry for May Transactions
Date	Account Title	Dr $	Cr $
May 5.	Inventory	340
	Cash		340
May 10.	Cash	700
	Sales		700
	Cost of Goods Sold	472.5
	Inventory		472.5