Answered: equired: Calculate for both year 1 and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A firm has the following transactions with its product R

Year 1

Opening stock: nil

Buys 10 units at GHc 300 per unit

Buys 12 units at GHc 250 per unit

Sells 8 units at GHc 400 per unit

Buys 6 units at GHc 200 per unit

Buys 12 units at GHc 400 per unit

Year 2

Buys 10 units at GHc 200 per unit

Sells 5 units at GHc 400 per unit

Buys 12 units at GHc 150 per unit

Sells 25 units at GHc 400 per unit

Required:

Calculate for both year 1 and year 2 the value of

i. Sales

Using, separately, the weighted average and the FIFO methods of inventory valuation. Present all workings clearly

Expert Solution

Step 1

Year 1	Purchases			Cost of goods sold			Ending inventory
Date	Units	Unit cost	Total cost	Units	Unit cost	Total cost	Units	Unit cost	Total cost
1	10	300	3,000				10	300	3,000
2	12	250	3,000				10	300	3,000
							12	250	3,000
3				8	300	2,400	2	300	600
							12	250	3,000
4	6	200	1,200				2	300	600
							12	250	3,000
							6	200	1,200
5	12	400	4800				2	300	600
							12	250	3,000
							6	200	1,200
							12	400	4800
				8		2,400	32		9,600

Step 2

Year2	Purchases			Cost of goods sold			Ending inventory
Date	Units	Unit cost	Total cost	Units	Unit cost	Total cost	Units	Unit cost	Total cost
1	10	200	2000				10	200	2000

2				5	200	1000	5	200	1000
3	12	150	1800				5	200	1000
							12	150	1800
4				17	400	6800	0	0	0
				22		7,800

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