Accounting - Inventories?

Question

2. The following lots of a particular commodity were available for sale during the year:

Beginning inventory 10 units at $60

First purchase 40 units at $59

Second purchase 35 units at $62

Third purchase 15 units at $63

2a. The total cost of the 25 units in inventory

by the last-in, first-out method is

2b. The total cost of the 25 units in inventory

by the average cost method is

Summarized data on sales and merchandise available for sale are

as follows:

Cost Retail

June 1 Merchandise inventory $100,000 $180,000

June 1–30 Purchases (net) 152,000 240,000

June 1–30 Sales (net) 250,000

The estimated cost of the merchandise inventory on June 30 by the retail method is

Answer 1

Beginning inventory 10 units at $60

First purchase 40 units at $59

Second purchase 35 units at $62

Third purchase 15 units at $63

Total units available for sale 100; total cost $6,075

Average cost = $6,075/100 = $60.75

2a. The total cost of the 25 units in inventory by the last-in, first-out method is:

10 units at $60 plus 15 units at $59 = $1,485

2b. The total cost of the 25 units in inventory by the average cost method is:

25 units x $60.75 = $1,518.75

Summarized data on sales and merchandise available for sale are as follows:

Cost; Retail

June 1 Merchandise inventory $100,000; $180,000

June 1–30Purchases (net) 152,000; 240,000

Total available for sale $252,000; $420,000

Cost is (252,000/420,000 x 100%) of retail = 60%

Available for sale at retail $420,000

June 1–30Sales (net) ($250,000)

Ending inventory at retail $170,000

Cost is 60% of retail, so ending inventory at cost = 60% x $170,000 = $102,000