Question

During the year, Wright Company sells 450 remote-control airplanes for $100 each. The company has the following inventory purchase transactions for the year.

Date	Transaction	Number of Units			Unit Cost			Total Cost
Jan. 1	Beginning inventory		50		$	81		$	4,050
May. 5	Purchase		245			84			20,580
Nov. 3	Purchase		190			89			16,910
			485					$	41,540

1) Using weighted average cost, What is the ending inventory

ans-1284.75

2) using LIFO, what is Cost of Goods sold

ans-40325

3) Using FiFo, what is the journal entry to record COGS

credit to inventory $40,325

*** i already know the answers i just need to know how to get them, please make it as simple as possible, this is just me reviewing for my final exam, no complex charts please!!!

Answer 1

There are three methods for inventory valuation

• weighted average as the name suggests average cost per unit is found out and multiplied with ending inventory
• LIFO Last in first out it .The good received at latest date are sold first. Ending inventory will have goods purchased at earlier dates from beginning.
• FIFO first in first out. The goods received at earlier dates are sold first

1) weighted average cost = total cost/ number of units purchased

[50*$81+245*$84+190*$89]/485

=$41,540/485

=$85.65

ending inventory = ending stock*average cost

ending inventory = beginning+purchase-sale

=50+245+190-470

=15*$85.65

=$1284.75

2)LIFO cost of goods sold

Nov 3.	190	$89	$16,910
May 5	245	$84	$20,580
Jan 1	35[470-245-190]	$81	$2835[35*$81]
		Total cost of goods sold	$40,325
			[16910+20580+2835]

3) FIFO journal entry

FIFO

Jan 1	50	$81	$4,050
May 5	245	$84	$20,580
Nov 3	175[470-50-245]	$89	$15,575[175*89]
			[4050+20580+15575]
		Total cost of goods sold	$40,205

journal entry

	general Journal	debit	credit
	Cost of goods sold	$40,205
	inventory		$40,205

As per the answer given it seems that Wright Company sells 470 remote-control and not 450. There is an error in question

if we go by 450 sells units answers would be

1)

ending inventory = ending stock*average cost

ending inventory = beginning+purchase-sale

=50+245+190-450

=35*$85.65

=$2,997.75

2)

2)LIFO cost of goods sold

Nov 3.	190	$89	$16,910
May 5	245	$84	$20,580
Jan 1	15[450-245-190]	$81	1215
		Total cost of goods sold	$38,705
			[16910+20580+1215]

3)

FIFO journal entry

FIFO

Jan 1	50	$81	$4,050
May 5	245	$84	$20,580
Nov 3	155[450-50-245]	$89	$13,795
			[4050+20580+13795]
		Total cost of goods sold	$38,425

journal entry

	general Journal	debit	credit
	Cost of goods sold	$38,425
	inventory		$38,425