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A company uses a perpetual inventory system. The company's beginning inventory of shoes and the purchases...

A company uses a perpetual inventory system. The company's beginning inventory of shoes and the purchases during a month as as follows:

Beginning Inventory Jan 1: 16 pairs at $10 ea

Purchase Jan 11: 14 pairs @ $12 ea

Purchase Jan 20: 23 pairs at $15 ea

On Jan 14 the company sold 25 units of shoes. The other 28 units remained in inventory at Jan 31.

Question 1: Assuming the company uses the average cost flow assumption what is the cost of goods sold to be recorded on Jan 14 (round to the nearest cent).

cost per unit=total cost available for sale/total units available for sale

328/30=10.9

23*10.9=250.7

Question 2: The total cost of goods available for sale is $673. Assuming average cost flow what would the ending inventory be on Jan 31?

COGS/Total pairs available for sale?

Solutions

Expert Solution

Correct Answer:

Requirement 1:

Cost of goods sold to be recorded on 14- Jan = $ 328.00

Cost of Goods sold

Units

Cost per unit

value

Beginning Inventory

$                                -  

Purchases

$                                -  

14-Jan

25

$                         10.93

$                       273.25

Total

25

$                       273.25

Cost of Goods Available for sale

Units

Cost per unit

value

Beginning Inventory

16

$                         10.00

$                       160.00

Purchases

11-Jan

14

$                         12.00

$                       168.00

Total

30

$                       328.00

Weighted Average Cost Per unit

Units

(A)

30

Total Cost

(B)

$                      328.00

Average Cost

(C=B/A)

$                         10.93

Requirement 2:

The Ending inventory = $ 00.00

Working:

FIFO

A

Total Units Available for sale

53

$                673.00

Units Sold

53

Ending Inventory Units

0

Valuation

Cost of Goods Sold

25

$                         10.93

$                273.33

28

$                         14.27

$                399.67

B

Total Cost of Goods Sold

53

units

$                673.00

A-B

Ending Inventory

0

units

$                         0

End of answer.

Thanks.

ekkarill92 answered 1 year ago
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