1 answer

The following information is taken from the inventory records of the CNB Company for the month...

Question:

The following information is taken from the inventory records of the CNB Company for the month of September: Beginning inventory, 9/1/2021 8,000 units @ $10.00 Purchases: 9/7 6,000 units @ $10.70 9/25 16,000 units @ $10.90 Sales: 9/10 6,000 units 9/29 10,000 units 14,000 units were on hand at the end of September. Required: 1. Assuming that CNB uses a periodic inventory system and employs the average cost method, determine cost of goods sold for September and September's ending inventory. 2. Assuming that CNB uses a perpetual inventory system and employs the average cost method, determine cost of goods sold for September and September's ending inventory.


Answers

Ans. 1 Periodic Average cost method:
Available for sale
Date Units Rate Total
01-Sep 8000 $10.00 $80,000
07-Sep 6000 $10.70 $64,200
25-Sep 16000 $10.90 $174,400
Cost of goods available for sale 30000 $318,600
Average cost per unit =   Total cost of goods available for sale / Total units available
$318,600 / 30,000
$10.62 per unit
Ending inventory =   Average cost per unit * Ending inventory units
$10.62 * 14,000
$148,680
Cost of goods sold = Total cost of goods available for sale - Ending inventory
$318,600 - $148,680
$169,920
Ans. 2 Perpetual Weighted Average method:
Purchase Cost of goods sold Balance
Date Quantity Rate Total cost Quantity Rate Total cost Quantity Rate Total cost
01-Sep 8000 $10.00 $80,000 8000 $10.00 $80,000
07-Sep 6000 $10.70 $64,200 14000 $10.30 $144,200
10-Sep 6000 $10.30 $61,800 8000 $10.30 $82,400
25-Sep 16000 $10.90 $174,400 24000 $10.70 256800
29-Sep 10000 $10.70 $107,000 14000 $10.70 $149,800
Total Cost of goods sold $168,800 Ending inventory $149,800
*Weighted average rate is calculated by using the formula of (Total available balance / Total units available).
.

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