Question

Question:

Tempo Ltd. is a retailer operating in Dartmouth, Nova Scotia. Tempo uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory; the inventory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Tempo Ltd. for the month of January 2020.

Ignore GST

Date	Description	Quantity	Unit Cost or Selling Price
December 31	Ending inventory	150	£19
January 2	Purchase	100	21
January 6	Sale	150	40
January 9	Sale return	10	40
January 9	Purchase	75	24
January 10	Purchase return	15	24
January 10	Sale	50	45
January 23	Purchase	100	26
January 30	Sale	160	50

1)Calculate (i) cost of goods sold and (ii) ending inventory under perpetual moving average cost. Round unit cost calculations to three decimal places.

Follow these format:

Date	Purchases	Cost of Goods Sold	Balance (in units and cost)

2)Calculate ending inventory and cost of goods sold under periodic FIFO. There were 60 units correctly counted in ending inventory. (Hint: Ignore sales and sales returns when creating COGA; but do not ignore purchase returns.)

Follow these format:

Date	Explanation	Units	Unit Cost	Total Cost

Answer 1

Date	Particulars	Qty Purc	Cost	Qty Sold	Sale value	bal on hand	Cost
Dec 31 2020	Clo Bal					150	1350
Jan 2	Purchase	100	2100			250	3450
Jan 6	Sale			150	6000	100	-2550
Jan 9	Sale Ret			-10	-400	110	-2150
Jan 9	purchase	75	1800			185	-350
Jan 10	Pur ret	-15	-360			170	-710
Jan 10	Sale			50	2250	120	-3000
Jan 23	Pur	100	2600			220	-400
Jan 30	Sale			160	4800	60	-5200

1). I) There fore Cost of goods sold Rs 12650 for the quantity sold 350 units for the month of January.

ii) Ending inventory under perpetual moving average cost.

Will be -5200/60= -86.67

2) Ending inventory During the period of January under the FIFO Method shall be the 60 quantity which we calculated even in step 1 that should be purchased on the January 23 because it is an FIFO Method so we have to consider that last purchase details only as an ending inventory.

Cost Of ending inventory under FIFO = 60*26 =1560

In a periodic inventory system when a sale is made, the entry to record the cost of goods sold is not made. At the end of accounting period, the quantity of inventory on hand (ending inventory) is found by a physical count and if the FIFO method is used to compute the cost of ending inventory, the cost of most recent purchases are used. Once the cost of ending inventory has been computed, the cost of goods sold can be computed easily using the following simple formula:

Cost of Goods sold= Cost of units in beginning inventory + Cost of units purchased during the period – Cost of units in ending inventory

Periodic invetoinv system for the month Jan 2020:

Date	Expalanation	units	cost per unit	Total cost
Dec 31	Balance Inv	150	19	1350
Add
Jan 2	Purchases	100	21	2100
Jan 9	Purchases	60	24	1440
Jan 23	Purchases	100	26	2600
	Sub total			7490
	Cost of end inv	-60	26	-1560
	Total	350		5930