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Inventory 3-8-2021

The document provides inventory, purchase, and sales data for Gerald D. Englehart Company for the month of March. It asks to calculate the cost of inventory on hand and cost of goods sold on March 31 using an average costing method under both a periodic and perpetual inventory system. For the periodic system, it provides a table calculating the average unit cost of $4.61 and cost of inventory as $2,305 with cost of goods sold of $4,145. For the perpetual system, it provides a table showing the calculation of average unit cost and adjustment of inventory balances with each transaction to determine ending inventory of $2,424 and cost of goods sold of $4,026.

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382 views

Inventory 3-8-2021

The document provides inventory, purchase, and sales data for Gerald D. Englehart Company for the month of March. It asks to calculate the cost of inventory on hand and cost of goods sold on March 31 using an average costing method under both a periodic and perpetual inventory system. For the periodic system, it provides a table calculating the average unit cost of $4.61 and cost of inventory as $2,305 with cost of goods sold of $4,145. For the perpetual system, it provides a table showing the calculation of average unit cost and adjustment of inventory balances with each transaction to determine ending inventory of $2,424 and cost of goods sold of $4,026.

Uploaded by

bob
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1) Gerald D. Englehart Company has the following inventory, purchases, and sales data for the month of
March.
Inventory: March 1, 200 units @ $4.00
Purchases:
March 10, 500 units @ $4.50
March 20 , 400 units @ $4.75
March 30, 300 units @ $5.00
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, determine the cost of inventory on hand at

March 31 and the cost of goods sold for March under (c) average-cost.

Answer

Average cost- Periodic system

Date Explanation Units Cost per unit Total Cost


1 March Beginning Inv 200 4 800
10 March Purchase 500 4.5 2250
20 March Purchase 400 4.75 1900
30 March Purchase 300 5 1500
Units available for 1400 6450
sale
(-) Sold units (900)
Ending inventory 500
Average cost = Cost of units available for sale/units available for sale
= 6450/1400 = 4.61
Units Average cost Total cost
Cost of ending 500 4.61 2305
inventory
Cost of goods sold = cost of units available for sale – cost of ending inventory
= 6450 – 2305 = 4145
2) Gerald D. Englehart Company has the following inventory, purchases, and sales data for the month of
March.
Inventory: March 1, 200 units @ $4.00
Purchases:
March 10, 500 units @ $4.50
March 20 , 400 units @ $4.75
March 30, 300 units @ $5.00
Sales:
March 15, 500 units
March 25, 400 units
The physical inventory count on March 31 shows 500 units on hand.
Instructions:
Under a Perpetual inventory system, determine the cost of inventory on hand at

March 31 and the cost of goods sold for March under (c) average-cost.

Perpetual inventory system and average cost (moving average)

Date Explanation Purchase COGS Balance


Units Cost Total Units Cost Total Units Total Average
per cost per cost cost
unit unit
1 Beg inv 200 800 4
Mach
10 Purchase 500 4.5 2250 700 3050 4.357
Mar (200+500) (800+2250) (3050/700)
15 Sales 500 4.357 2179 200 (700- 871 (3050- 4.357
Mar 500) 2179)
20 Purchase 400 4.75 1900 600 2771 4.618
Mar (200+400) (871+1900) (2771/600)
25 Sales 400 4.618 1847 200 (600- 924 (2771- 4.618
Mar 400) 1847)
30 Purchase 300 5 1500 500 2424 4.848
Mar (200+300) (924+1500) (2424/500)
Total 1200 5650 900 4026

 Anytime we have a new purchase we have to update the average cost

COGS = 4026

Ending inventory = 2424


3) Early in 2010 Westmoreland Company switched to a just-in-time inventory system. Its sales, cost of
goods sold, and inventory amounts for 2009 and 2010 are shown below.

2009 2010

 Sales $2,000,000 $1,800,000

 Cost of goods sold 1,000,000 910,000

 Beginning inventory 290,000 210,000

 Ending inventory 210,000 50,000

 Determine the inventory turnover and days in inventory for 2009 and 2010.

Answer

Inventory turnover = COGS/average inventory

*Average inventory = (beg inv + end inv)/2

* COGS = sales – gross profit >>>>>>> (gross profit = sales – COGS)

Days in inventory = 365/inventory turnover

Year 2009

Average inventory = (beg inv + end inv)/2 = (290000+210000)/2 = 250000

Inventory turnover = COGS/average inventory = 1000000/250000 = 4 times

Days in inventory = 365/inventory turnover = 365/4= 91.25 days

Year 2010

Average inventory =(beg inv + end inv)/2 = (210000+50000)/2 = 130000

Inventory turnover = COGS/average inventory = 910000/130000 = 7 times

Days in inventory = 365/inventory turnover = 365/7 = 52.14 days

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