Question

Samuelson and Messenger (SAM) began 2021 with 250 units of its one product. These units were purchased near the end of 2020 for $24 each. During the month of January, 125 units were purchased on January 8 for $27 each and another 250 units were purchased on January 19 for $29 each. Sales of 170 units and 130 units were made on January 10 and January 25, respectively. There were 325 units on hand at the end of the month. SAM uses a perpetual inventory system.

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

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 250 $24.00 $6,000 $24.00 $0 $24.00 $0 $24.00 $0 Purchases: January 8 125 27.00 3,375 27.00 0 27.00 0 27.00 0 January 19 250 29.00 7,250 29.00 0 29.00 0 29.00 0 Total 625 $16,625 0 $0 0 $0 0

Answer 1

Answer to Question:

1)

FIFO Method,

Closing Inventory = 325 units .

Total Value of Closing Inventory = $9275

Cost of goods sold = ($4,080+ $3,270) =$7,350

FIFO METHOD
	COST OF GOODS AVAILABLE FOR SALE	COST OF GOODS SOLD JAN, 10	COST OF GOODS SOLD JAN, 25	ENDING INVENTORY
Date	Particulars	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
Jan, 01	Beginning inventory	250	$24	$6,000	170	$24	$4,080	80	$24	$1,920
Purchases
Jan, 08	Purchases	125	$27	$3,375				50	$27	$1,350	75	$27	$2,025
Jan, 19	Purchases	250	$29	$7,250							250	$29	$7,250
	TOTAL	625		16625	170		$4,080	130		3270	325		9275

........................................................................................................................................................................................

Answer to Question:

2)

Average Cost:

Closing Inventory = 325 units .

Total Value of Closing Inventory = $8,865

Cost of goods sold = ($4,250+ $3,510) =$7,760

(Refer Table below)

AVERAGE COST METHOD
	PARTICULARS	INVENTORY ON HAND	COST OF GOODS SOLD
Date	Particulars	No of Units	Cost per unit	Inventory Value	No of Units Sold	Avg. Cost per unit	Cost of Goods Sold
Jan, 01	Beginning inventory	250	$24	$6,000
Jan, 08	Purchases	125	$27	$3,375
	Sub-Total average Cost	375	$25	$9,375
Jan, 10	Sales	(170)	$25	($4,250)	(170)	$25	($4,250)
	Sub-Total average Cost	205	$25	$5,125
Jan, 19	Purchases	250	$29	$7,250
	Sub-Total average Cost	455	$27	$12,375
Jan, 25	Sales	(130)	$27	($3,510)	(130)	$27	($3,510)
	TOTAL	325	$26.98	$8,865	300		($7,760)