Question

Weighted Average Cost Method with Perpetual Inventory

The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are as follows:

Date		Transaction	Number of Units		Per Unit		Total
Jan. 1		Inventory	7,100		$80.00		$568,000
10		Purchase	21,300		90.00		1,917,000
28		Sale	10,650		160.00		1,704,000
30		Sale	3,550		160.00		568,000
Feb. 5		Sale	1,420		160.00		227,200
10		Purchase	51,120		92.50		4,728,600
16		Sale	25,560		170.00		4,345,200
28		Sale	24,140		170.00		4,103,800
Mar. 5		Purchase	42,600		94.50		4,025,700
14		Sale	28,400		170.00		4,828,000
25		Purchase	7,100		95.00		674,500
30		Sale	24,850		170.00		4,224,500

Required:

1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in Exhibit 5, using the weighted average cost method. Round unit cost to two decimal places, if necessary. Round all total cost amounts to the nearest dollar.

Midnight Supplies Schedule of Cost of Goods Sold Weighted Average Cost Method For the Three Months Ended March 31
	Purchases			Cost of Goods Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jan. 1							fill in the blank 1	$fill in the blank 2	$fill in the blank 3
Jan. 10	fill in the blank 4	$fill in the blank 5	$fill in the blank 6				fill in the blank 7	fill in the blank 8	fill in the blank 9
Jan. 28				fill in the blank 10	$fill in the blank 11	$fill in the blank 12	fill in the blank 13	fill in the blank 14	fill in the blank 15
Jan. 30				fill in the blank 16	fill in the blank 17	fill in the blank 18	fill in the blank 19	fill in the blank 20	fill in the blank 21
Feb. 5				fill in the blank 22	fill in the blank 23	fill in the blank 24	fill in the blank 25	fill in the blank 26	fill in the blank 27
Feb. 10	fill in the blank 28	fill in the blank 29	fill in the blank 30				fill in the blank 31	fill in the blank 32	fill in the blank 33
Feb. 16				fill in the blank 34	fill in the blank 35	fill in the blank 36	fill in the blank 37	fill in the blank 38	fill in the blank 39
Feb. 28				fill in the blank 40	fill in the blank 41	fill in the blank 42	fill in the blank 43	fill in the blank 44	fill in the blank 45
Mar. 5	fill in the blank 46	fill in the blank 47	fill in the blank 48				fill in the blank 49	fill in the blank 50	fill in the blank 51
Mar. 14				fill in the blank 52	fill in the blank 53	fill in the blank 54	fill in the blank 55	fill in the blank 56	fill in the blank 57
Mar. 25	fill in the blank 58	fill in the blank 59	fill in the blank 60				fill in the blank 61	fill in the blank 62	fill in the blank 63
Mar. 30				fill in the blank 64	fill in the blank 65	fill in the blank 66	fill in the blank 67	fill in the blank 68	fill in the blank 69
Mar. 31	Balances					$fill in the blank 70			$fill in the blank 71

2. Determine the total sales, the total cost of goods sold, and the gross profit from sales for the period.

Total sales	$fill in the blank 72
Total cost of goods sold	$fill in the blank 73
Gross profit	$fill in the blank 74

3. Determine the ending inventory cost as of March 31.
$fill in the blank 75

Feedback

1. When the perpetual inventory system is used, revenue is recorded each time a sale is made along with an entry to record the cost of the goods sold. Under the weighted average method the average unit cost must be determined after each purchase by dividing the total of cost of goods on hand by the total units on hand. The cost of goods sold is computed multiplying the average unit cost on the date of sales by the units sold. The inventory balance after a sale is computed by multiplying the average unit cost by the units on hand.

2. Total sales are obtained by taking the number of units sold times their sale prices for all sales and adding these amounts together. The total cost of goods sold can be obtained by adding the costs in the perpetual inventory record. Sales minus cost of goods sold equals gross profit.

3. The ending inventory cost can be taken from the perpetual inventory record in Part (1).

Answer 1

r.

Midnight Supplies Schedule of Cost of Goods Sold Weighted Average Cost Method For the Three Months Ended March 31
	Purchases			Cost of Goods Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jan. 1							7100	$80.00	$568000
Jan. 10	21300	$90.00	$1917000				28400	$87.50	2485000
Jan. 28				10650	$87.50	$931875	17750	$87.50	1553125
Jan. 30				3550	$87.50	310625	14200	$87.50	1242500
Feb. 5				1420	$87.50	124250	12780	$87.50	1118250
Feb. 10	51120	$92.50	4728600				63900	$91.50	5846850
Feb. 16				25560	$91.50	2338740	38340	$91.50	3508110
Feb. 28				24140	$91.50	2208810	14200	$91.50	1299300
Mar. 5	42600	$94.50	4025700				56800	$93.75	5325000
Mar. 14				28400	$93.75	2662500	28400	$93.75	2662500
Mar. 25	7100	$95.00	674500				35500	$94.00	3337000
Mar. 30				24850	$94.00	2335900	10650		1001100
Mar. 31	Balances					$10912700			$1001100

Calculation of Average cost per unit

Jan 10

Total cost= $568000+1917000= $2485000

Total quantity= 7100+21300= 28400

Average cost per unit= $2485000/28400= $87.5

Feb 10

Total cost= $1118250+4728600= $5846850

Total quantity= 12780+51120= 63900

Average cost per unit= $5846850/63900= $91.50

Mar 5

Total cost= $1299300+4025700= $5325000

Total quantity= 14200+42600= 56800

Average cost per unit= $5325000/56800= $93.75

Mar 25

Total cost= $2662500+674500= $3337000

Total quantity= 28400+7100= 35500

Average cost per unit= $3337000/35500= $94.00

2.  Total sales= $1704000+568000+227200+4345200+4103800+4828000+4224500= $20000700

Total sales	$20000700
Total cost of goods sold	10912700
Gross profit	$9088000

3. Determine the ending inventory cost as of March 31.

$1001100

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