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Chapter 6: Q29PGA_3 (page 367)

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-average inventory costing method.

Short Answer

Expert verified

The ending inventory at average cost comes out to be $1,400.

Step by step solution

01

Step-by-Step SolutionStep 1: Weighted average costing method

The weighted average costing method is the mid-way between the FIFO method and the LIFO method. In the weighted average method, the average cost is computed after every purchase, and the goods are sold on the immediate average cost. The average cost is the mean value of FIFO cost and LIFO cost.

02

Perpetual inventory table under the weighted average method


Purchases
Cost of goods sold
Inventory on hand

Date

Qty

Unit cost

Total Cost

Qty

Unit cost

Total Cost

Qty

Unit Cost

Total Cost

Aug 1

50

$35

$1,750

Aug 3

45

$35

$1,575

5

$35

$175

Aug 8

90

$54

$4,860

95

$53

$5,035

Aug 21

85

$53

$4,505

10

$53

$530

Jan 26

15

$58

$870

25

$56

$1,400

Total

105

$5,730

130

$6,080

25

$56

$1,400

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Most popular questions from this chapter

Some of L and K Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is\(32,000 below the business’s cost of the goods, which was \)98,000. Before any adjustmentsat the end of the period, the company’s Cost of Goods Sold account has a balanceof $410,000.

Requirements

3. At what amount should the company report cost of goods sold on the incomestatement?

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries—LIFO

Requirements

1. Prepare Boston Cycle’s perpetual inventory record assuming the company uses theLIFO inventory costing method.

Question:Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is \(119. Company records indicate the following for a particular line ofGolf Unlimited’s putters:

Date Item Quantity Unit Cost

Nov. 1 Balance 24 \) 53

6 Sale 20

8 Purchase 30 70

17 Sale 30

30 Sale 2

Requirements

2. Journalize Golf Unlimited’s inventory transactions using the weighted-averageinventory costing method. (Assume purchases and sales are made on account.)

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

Question:Hot Bread Bakery reported Net sales revenue of \(44,000 and cost of goods sold of \)33,000. Compute Hot Bread’s correct gross profit if the company made either of thefollowing independent accounting errors. Show your work.

b. Ending merchandise inventory is understated by $8,000.
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