Question

In: Accounting

Benneett Basketball sells a variety of basketball and accessories. Information follows Bennett Basket-ball's purchase during February...

Benneett Basketball sells a variety of basketball and accessories. Information follows Bennett Basket-ball's purchase during February and March for UP-Snap, one of its top brands of basketballs.

Purchases Sales

Units Unit Cost Units Unit Price

Feb.7 18 32

Feb.23 50 $20

Feb.26 50 30

Mar.10 24 19

Mar.23 32 29

Benett uses a perpetual inventory system. On Feburary1, Bennett had 36 units on hand A COST OF $21 EACH. aLL purchases and sales during February and March were on account.

Instructions: (A) Determine the cost of goods sold and ending inventory under a perpetual inventory system using (1) FIFO and (2) weighted average. (rOUND THE WEIGHTED AVERAGE COST PER UNIT TO TWO DECIMAL PLACES). (B) Calculate gross profit using (1) FIFO AND (2) WEIGHTED AVERAGE

Solutions

Expert Solution

(A)

Determination of cost of goods sold and ending inventory under perpetual inventory system:

Feb .01 Opening stock = 36*21 = $ 756

Purchases:

Feb .23, 50 units *20 = $ 1000

Mar. 10, 24 units * 19 = $ 456

Sales:

Feb.07, 18 units *32 = $576

Feb.26, 50 units*30 = $1500

Mar 23, 32 units*29 = $ 928

Total Sales unit = 100 units

Total Sales Price = $ 3004

Weighted Average cost =Total purchase price/Number of units purchased =

(36*21+50 units *20+24 units * 19)/36+50+24 = (756+1000+456)/110 = 2212/110 = 20.11

(1)

Cost of goods sold under FIFO Method =

36 units*21 + 50 units *20 + 14 units*19 = 756 + 1000 + 266 = $ 2022.

Ending inventory in units = Opening units + Purchase units – Sold units = 36 + 74 – 100 = 10 units

Ending inventory under FIFO Method = 10 units*19 = $190

(2)

Cost of goods sold under Weighted Average Method = 100 units * 20.11 = $ 2011

Ending inventory under Weighted Average Method = 10 units*20.11 =$ 201.1

(B)

Calculation of Gross profit:

(1)

Total Sales unit = 100 units

Total Sales Price = $ 3004

Gross profit under FIFO Method = Sales price – Cost of goods sold

= $3004 - $2022 = $982

(2)

Total Sales unit = 100 units

Total Sales Price = $ 3004

Gross profit under Weighted Average Method = Sales price – Cost of goods sold

= $3004 - $2011 = $993


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