16E_1 - Horngren'S Financial And Managerial Accounting

Question

Question: Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is \(119. Company records indicate the following for a particular line ofGolf Unlimited’s putters:

Date Item Quantity Unit Cost

Nov. 1 Balance 24 \) 53

6 Sale 20

8 Purchase 30 70

17 Sale 30

30 Sale 2

 

Requirements

1. Prepare a perpetual inventory record for the putters assuming Golf Unlimited usesthe FIFO inventory costing method. Then identify the cost of ending inventoryand cost of goods sold for the month.

Step-by-Step Solution

Answer

Ending Inventory:$140

COGS:$3,232

Step-by-Step-Solution Step1: Perpetual Inventory Record using FIFO

Date	Purchase/opening			Sales			Balance
	Units	Cost per unit	Amount	Units	Cost per unit	Amount	Units	Cost per unit	Amount
Nov 1	24	$53	$1,272				24	$53	$1,272
6				20	$53	$1,060	4	$53	$212
8	30	$70	$2,100				4 30	$53 $70	$2,312
17				4 26	$53 $70	$2,032	4	$70	$280
30				2	$70	$140	2	$70	$140
Total	54		$3,372	52		$3,232	2	$70	$140

Step 2: Ending inventory and COGS

Ending inventory in the perpetual system under the FIFO method is the value of ending inventory at the current cost and the COGS would be based on historic prices. This is so because of the implication of the first in first out method in the allocation of cost to the issued inventory.

 

In the given case, the ending inventory on 30^th Nov amounts to $140 and the COGS for the period amounts to $3,232.