Question

Discuss the different methods to account for cash discount. Support you answer with examples.

Answer:

During April, the following changes in the single inventory product took place

          April   1     Balance                        1,400 units @ $24

                      8     Purchased                      900 units @ $36

                    12     Purchased                      700 units @ $30

                    24     Purchased                      400 units @ $50

                    10     Sold                              1,500 units @ $40

                    26     Sold                              1,700 units @ $44

Calculate the COGS after each sales transaction and the ending inventory after each transaction under the following methods.

(a)   FIFO.

(b)   Average Cost. (round numbers to the nearest 10)

* Answer these questions with no hand wriring or pics

Answer 1

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD
	RECIEPTS	COST OF GOODS SOLD	BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
01-Apr							1400	24	33600
08-Apr	900	36	32400				1400	24	33600
							900	36	32400
10-Apr				1400	24	33600
				100	36	3600	800	36	28800
12-Apr	700	30	21000				800	36	28800
							700	30	21000
24-Apr	400	50	20000				800	36	28800
							700	30	21000
							400	50	20000
26-Apr				800	36	28800
				700	30	21000
				200	50	10000	200	50	10000
TOTAL	2000		73400	3200		97000	200		10000
STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL Average METHOD
	RECIEPTS	COST OF GOODS SOLD	BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
01-Apr							1400	24	33600
08-Apr	900	36	32400				1400	24	33600
							900	36	32400
Average							2300	28.7	66000
10-Apr				1500	28.7	43050	800	28.7	22950
12-Apr	700	30	21000				800	28.7	22950
							700	30	21000
Average							1500	29.3	43950
24-Apr	400	50	20000				1500	29.3	43950
							400	50	20000
Average							1900	33.66	63950
26-Apr				1700	33.66	57222	200	33.66	6728
TOTAL	2000		73400	3200		100272	200		6728