Calculate a) cost of goods sold, b) ending inventory, and c) gross margin for A76 Company, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for weighted average (AVG).

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 10, Problem 11PA
Textbook Problem
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Calculate a) cost of goods sold, b) ending inventory, and c) gross margin for A76 Company, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for weighted average (AVG).

To determine

Introduction:

Weighted Average Method is used to calculated cost of goods sold. In this method, cost allocated to sold units is computed by taking weighted average cost of the goods purchased.

To compute:

The COGS, ending inventory and gross margin under three different cost allocation methods using perpetual inventory system. Also, show calculations for Weighted Average Method.

Explanation of Solution

Table showing COGS, ending inventory, and gross margin under three different cost allocation methods using perpetual inventory system:

 Particulars LIFO ($) FIFO ($) Weighted Average ($) COGS2 97,900 96,260 96,827 Ending Inventory1 23,660 25,300 24,732 Gross Margin3 34,580 36,220 35,653 Table (1) Working Notes: 1. Computation of Closing Inventory:  Particulars Amount ($) Closing inventory after sale-1 (80 Units×$100) 8,000 Closing inventory after sale-2 (((520+80−400)Units)×$102.6) 20,520 Closing inventory after sale-3 (((200+400−370)Units)×$107.53) 24,732 Table (2) 2. Computation of COGS:  Particulars Amount ($) COGS for Sales 1 (160 Units×$100) 16,000 COGS for Sales (400 Units×$102.6) 41,040 COGS for Sales 3 (370 Units×\$107

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