15E_3 - Horngren'S Financial And Managerial Accounting

Question

Question: Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month’s milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

3. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the weighted-average inventory costing method. Round allamounts to the nearest cent.

Step-by-Step Solution

Answer

The ending inventory on Nov.15 amounts to $14.58

Step-by-Step-Solution Step1: Perpetual Inventory weighted average Method

The Perpetual Inventory method is a system of maintaining inventory records continuously after every purchase and sale. The weighted average is a method of allocating costs based on the average cost of all inventory throughout a period.

 

So perpetual inventory under the weighted average method maintains the continuous record of inventory based on the average cost of every purchase or sale.

Step 2: Calculation of ending inventory

Date	Purchase/opening	Sales	Balance
	Units	Cost per unit	Amount	Units	Cost per unit	Amount	Units	Cost per unit	Amount
Nov 2	11	$2.15	$23.65				11	$2.15	$23.65
6	2	$2.80	$5.6				13	$2.25	$29.25
8				6	$2.25	$13.5	7	$2.25	$15.75
13	3	$2.85	$8.55				10	$2.43	$24.3
14				4	$2.43	$9.72	6	$2.43	$14.58