Question

Sheridan Company uses a perpetual inventory system. The following information is available for November: Units Purchase Price Sales Price Nov. 1 Balance 8 $4.00 4 Purchase 20 $4.50 7 Purchase 20 $5.00 10 Sale (8) $8.00 12 Sale (32) $8.00

Calculate the cost of goods sold and ending inventory under FIFO and Calculate the cost of goods sold and ending inventory under weighted average

Answer 1

A) FIFO Method:

Date		Purchase	Sale	Ending Inventory
Nov.1				8 units * $4 = $32
Nov.4	Purchase	20 units * $4.50 = $90		8 units * $4 = $32
				20 units * $4.50 = $90
Nov.7	Purchase	20 units * $5 = $100		8 units * $4 = $32
				20 units * $4.50 = $90
				20 units * $5 = $100
Nov.10	Sale		8 units * $4 = $32	20 units * $4.50 = $90
				20 units * $5 = $100
Nov.12	Sale		20 units * $4.50 = $90	8 units * $5 = $40
			12 units * $5 = $60
		Ending Inventory		8 units * $5 = $40

Ending Inventory under FIFO method is $40

Cost of Goods Sold = Begining Inventory + Purchases - Ending Inventory

                             = $32 + ($90 + $100) - $40

                               = $182

Cost of Goods Sold under FIFO method is $182

B) Weighted Average Cost Method is as follows:

Cost Per Unit = $32 + ($90 + $100) / 8 units + 20 units + 20 units

                     = $222/ 48 units

                    = $4.625 Per Unit

Ending Inventory = (8 units + 20 units + 20 units - 8 units + 32 units )

                       = 8 Units

Ending Inventory Cost = 8 Units * $4.625 Per Unit

                                   = $37

Ending Inventory under Weighted Average Costmethod is $37

Cost of Goods Sold = Begining Inventory + Purchases - Ending Inventory

                             = $32 + ($90 + $100) - $37

                               = $185

Cost of Goods Sold under Weighted Average Cost method is $185