Question

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Transactions		Units			Unit Cost
Beginning inventory, January 1			1,800		$	50
Transactions during the year:
a.	Purchase, January 30		2,500			62
b.	Sale, March 14 ($100 each)		(1,450	)
c.	Purchase, May 1		1,200			80
d.	Sale, August 31 ($100 each)		(1,900	)

  

Assume that for the specific identification method (item 1d below) the March 14 sale was 580 units from beginning inventory and 870 units from the January 30 purchase, and that the sale on August 31 was 1220 units from the beginning inventory and 680 units from the May 1 purchase.

Required:
1.	Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods:

Answer 1

1) Last in first out :-

Particulars	Calculation	Amount($)
Beginning Inventory	1800 * $50	90000
Add : Purchases	2500 * $62	155000
	1200 * $80	96000
Goods Available for Sale		341000
Less : Ending Inventory	(1800*$50) + (350*$62)	(111700)
Cost of Goods Sole	(1450*$62)+(1200*$80)+(700*$62)	229300

Ending inventory :-

Particulars	Purchase	Sale	Balance
Opening Balance			1800@50
Purchase in Jan	2500@62		1800@50,2500@62
Sale in March		1450@62	1800@50,1050@62
Purchase in May	1200@80		1800@50,1050@62,1200@80
Sale in Aug.		1200@80,700@62	1800@50,350@62
Ending Balance			1800@50,350@62

2) Weighted Average Cost :-

Particulars	Calculation	Amount($)
Beginning Inventory	1800 * $50	90000
Add : Purchases	2500 * $62	155000
	1200 * $80	96000
Goods Available for Sale		341000
Less : Ending Inventory	(2150*$62	(133300)
Cost of Goods Sole	((5500-2150)*$62)	207700

Weighted Average price per unit :-

= Total amount available for sale / Total units available for sale

= $341000 / 5500 units

= $6.2

3) First in first out :-

Particulars	Calculation	Amount($)
Beginning Inventory	1800 * $50	90000
Add : Purchases	2500 * $62	155000
	1200 * $80	96000
Goods Available for Sale		341000
Less : Ending Inventory	(950*$62) + (1200*$80)	(154900)
Cost of Goods Sole	(1450*$50)+(350*$50)+(1550*$62)	186100

Ending inventory :-

Particulars	Purchase	Sale	Balance
Opening Balance			1800@50
Purchase in Jan	2500@62		1800@50,2500@62
Sale in March		1450@62	350@50,2500@62
Purchase in May	1200@80		350@50,2500@62,1200@80
Sale in Aug.		350@50,1550@62	950@62,1200@80
Ending Balance			950@62,1200@80