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Chapter 2

Inventories

Periodic Inventory System

1. Gerald D. Englehart company has the following inventory,purchases and sales data
for the month of March.
Inventory: March 1 200units @ $4.00 $800

Purchases March 10 500units @$4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

Sales : March 15 500 Units

March 25 400 Units

The physical inventory count on March 31 shows 500 units on hand

Instructions . Under a periodic inventory system determines the cost of inventory on hand
at March 31 and the cost of goods sold for March Under (a) FIFO and (b) Average cost
method.

Solution: Ending Inventory

Inventory: March 1 200units @ $4.00 $800

Purchases March 10 500units @$4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

1400 Units $ 6450

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FIFO METHOD
Date Units UnitCost Total Cost
March $5.00 $1,500
300
30
March
200 4.75 950 =Ending Inventory$2450
20
Cost of Goods Sold = $6450 - $2450 $4000

Average Cost Method

Average Unit Cost $6450 ÷ 1400 = $ 4.607

Ending Inventory 500 X $ 4.607 = $ 2303.50

Cost of Goods Sold : $6450 - $ 2303.50 $ 4146.50

2. Gerald D. Englehart company has the following inventory,purchases and sales data
for the month of March.(Same Problem 1- (Perpetual Inventory System)

Inventory: March 1 200units @ $4.00 $800

Purchases March 10 500units @$4.50 2,250

March 20 400 units @ $4.75 1,900

March 30 300 units @ $5.00 1,500

Sales : March 15 500 Units

March 25 400 Units

The physical inventory count on March 31 shows 500 units on hand

Instructions . Under a perpectual inventory system determin hte cost of inventory on

hand at March 31 and the cost of goods sold for March Under (a) FIFO and (b) Average
cost method.

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FIFO Method
Date Purchases Sales/ COGS Balance
01/3 (200 @ $4.0) $800
(200 @ $4.0) $800
10/3 (500 @ $4.50) $2250 (500@ $4.50) 2250
$3050
15/3 (200 @ $4.0) $800
300@4.50 1350 (200 @ $4.50) 900
2150

20/3 400@4.75 1900 (200 @ $4.50) 900

400@4.75 1900
2800
25/3 (200 @ $4.50) 900
200@4.75 950 200@4.75 950
30/3 300@5 1500 200@4.75 950
300@5 1500
Ending Inventory 2450
Cost of good sold 2150+1850 4000

Moving Average Cost Method

Date Purchases Cost of goods sold Balance

March 1 200@$4.00 $800

March 10 500@4.50 $2250 700@4.357 3050

(3050/700)=4.357

March 15 500 @ 4.357 2179 200@4.357 871

March 20 400@4.75 1900 600@4.618 2771

2771/600= 4.618

March 25 400@4.618 1847 200@4.618 924

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March 30 300@5.00 1500 500@4.848 2424

2424/500= 4.848

Cost of goods sold $4,026 Ending $ 2,424

Inventory

3. Lumley Company uses the perpetual inventory system and had the following
purchases and sales during March. 236E
Purchases Sales
Units Unit Cost Units Selling
Price/Unit
3/1 Beginning inventory 100 $40
3/3 Purchase 60 $50
3/4 Sales 70 $80
3/10 Purchase 200 $55
3/16 Sales 80 $90
3/19 Purchase 40 $60
3/25 Sales 150 $90
Instructions
Using the inventory and sales data above, calculate the value assigned to cost of goods
sold in March and to the ending inventory at March 31 using FIFO.

Date Purchases Sales Balance

1-Mar (100 @ $40) $4,000
3-Mar (60 @ $50) $3,000 (100 @ $40) 4000
(60 @ $50) $3,000
4-Mar (70 @ $40) $2,800 (30 @ $40) 1200
(60 @ $50) $3,000
10-Mar (200 @ $55) $11,000 (30 @ $40) 1200
(60 @ $50) 3000
(200 @ $55) $11,000
16-Mar (30 @ $40) 1200 (10 @ $50) 500
(50 @ $50) $2,500 (200 @ $55) $11,000
19-Mar (40 @ $60) $2,400 (10 @ $50) 500

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(200 @ $55) 11000

(40 @ $60) $2,400
25-Mar (10 @ $50) 500 (60 @ $55) 3300
(140 @ $55) $7,700 (40 @ $60) $2,400
March cost of goods sold = $14,700 ($2,800 + $1200 + $2500+500+7700)
March 31 inventory = $5,700 (3300+2400)

Date Purchases Sales Balance

1-Mar (100 @ $40) $4,000
3-Mar (60 @ $50) $3,000 160@43.75 7000

4-Mar (70 @ $43.75) 3062.5 90@43.75 3937.5

10-Mar (200 @ $55) $11,000 290@51.50 14937.5

16-Mar 80@51.50 4120 210@51.50 10817.5

19-Mar (40 @ $60) $2,400 250@52.87 13217.5

25-Mar 150@52.87
7930.5 100@52.87 5287
March cost of goods sold = 15113
March 31 inventory = $5287

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