Question

Samuelson and Messenger (S&M) began 2018 with 330 units of its one product. These units were purchased near the end of 2017 for $20 each. During the month of January, 165 units were purchased on January 8 for $23 each and another 330 units were purchased on January 19 for $25 each. Sales of 170 units and 200 units were made on January 10 and January 25, respectively. There were 455 units on hand at the end of the month. S&M uses a perpetual inventory system.

Required:
1. Complete the below table to calculate ending inventory and cost of goods sold for January using FIFO method.
2. Complete the below table to calculate ending inventory and cost of goods sold for January using average cost method.

Perpetual FIFO

Cost of Goods Available for Sale

Cost of Goods Sold - January 10

Cost of Goods Sold - January 25

Inventory Balance

# of units

Cost per unit

Cost of Goods Available for Sale

# of units sold

Cost per unit

Cost of Goods Sold

# of units sold

Cost per unit

Cost of Goods Sold

# of units in ending inventory

Cost per unit

Ending Inventory

Beg. Inventory

Purchases:

January 8

January 19

Total

Perpetual Average	Inventory on hand			Cost of Goods Sold
	# of units	Cost per unit	Inventory Value	# of units sold	Avg. Cost per unit	Cost of Goods Sold
Beginning Inventory
Purchase - January 8
Subtotal Average Cost
Sale - January 10
Subtotal Average Cost
Purchase - January 19
Subtotal Average Cost
Sale - January 25
Total

Answer 1

Ans. 1
	FIFO:	Cost of goods available for sale			Cost of goods sold - January 10			Cost of goods sold - January 25			Inventory Balance
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beginning inventory	330	$20.00	$6,600	170	$20.00	$3,400	160	$20.00	$3,200	0	$20.00	$0
	Purchases:
	08-Jan	165	$23.00	$3,795	0	$23.00	$0	40	$23.00	$920	125	$23.00	$2,875
	19-Jan	330	$25.00	$8,250	0	$25.00	$0	0	$25.00	$0	330	$25.00	$8,250
	Total	825		$18,645	170		$3,400	200		$4,120	455		$11,125
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
	For January - 10 sales : 170 units were sold from Beginning inventory. Now 160 units are remained in
	beginning inventory (i.e. 330 - 170 = 160 units).
	For January - 25 sales : 160 units were sold from Beginning inventory and remaining 40 units (i.e. 200 - 160 units) are
	sold from January - 8 purchase.
	Ending inventory   =   Units available for sale - Units sold
		Units available (a)	Units sold (b)	Units sold ©	Units in ending
			on Jan. - 10	on Jan. - 25	inventory (a-b-c)
	Beginning inventory	330	170	160	0
	Purchases:				0
	08-Jan	165	0	40	125
	19-Jan	330	0	0	330
	Total	825	170	200	455
Ans. 2	Perpetual Average:	Inventory on hand			Cost of goods sold
		Quantity	Rate	Total cost	Quantity	Average cost	Total cost
	Beginning inventory	330	$20.00	$6,600
	Purchase - January 8	165	$23.00	$3,795
	Subtotal Average Cost	495	$21.00	$10,395
	Sale - January 10	-170	$21.00	-$3,570	170	$21.00	$3,570
	Subtotal Average Cost	325	$21.00	$6,825
	Purchase - January 19	330	$25.00	$8,250
	Subtotal Average Cost	655	$23.02	$15,075
	Sale - January 25	-200	$23.02	-$4,604	200	$23.02	$4,604
	Total	455	$27.89	$10,471	370		$8,174
	Ending Inventory   = $10,471
	Cost of goods sold = $8,174
	*Units are sold on the previous average cost per unit.
	*Average cost per unit = Subtotal cost / Subtotal units.