Q2TI-d - Horngren'S Financial And Managerial Accounting

Question

Serenity Books has the following transactions in August related to merchandise inventory.

Aug. 1 Beginning merchandise inventory, 10 books @ \(15 each

         3 Sold 3 books @ \)20 each

       12 Purchased 8 books @ \(18 each

       15 Sold 9 books @ \)20 each

       20 Purchased 4 books @ \(20 each

       28 Sold 5 books @ \)25 each

 

d. Determine the cost of goods sold and ending merchandise inventory by preparing a perpetual inventory record using the weighted-average inventory costing method. Round weighted-average unit cost to the nearest cent and total cost to the nearest dollar.

Step-by-Step Solution

Answer

Cost of goods sold: $313

Ending Inventory: $85

Step 1: Weighted average inventory costing under perpetual record

Weighted Average costing is a cost flow assumption of applying the average cost for the issued inventory. Perpetual record is the method of updating inventory accounts continuously for each event. So average inventory under perpetual record is the method of applying average cost assumption for continuous updating of inventory records.  

Step 2: Computation of COGS and Ending Inventory under weighted average cost

Date	Purchase/opening			Sales			Balance
	Units	Cost per unit	Amount	Units	Cost per unit	Amount	Units	Cost per unit	Amount
Aug1	10	$15	$150				10	$15	$150
3				3	$15	$75	7	$15	$105
12	8	$18	$144				15	$17	$249
15				9	$17	$153	6	$17	$102
20	4	$20	$80				10	$17	$170
28				5	$17	$85	5	$17	$85
Total	22		$374	17		$313	5		$85