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Weighted average cost method with perpetual inventory The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A. Instructions 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual Inventory record similar to the one illustrated in Exhibit 5, using the weighted average cost method. 2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period. 3. Determine the ending inventory cost as of March 31.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 7, Problem 7.3APR
Textbook Problem

Weighted average cost method with perpetual inventory

The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A.

Instructions

  1. 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual Inventory record similar to the one illustrated in Exhibit 5, using the weighted average cost method.
  2. 2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
  3. 3. Determine the ending inventory cost as of March 31.

Expert Solution

(1)

To determine

Perpetual Inventory System:

Perpetual Inventory System refers to the inventory system that maintains the detailed records of every inventory transactions related to purchases, and sales on a continuous basis. It shows the exact on-hand-inventory at any point of time.

Weighted-average cost method:

Under weighted average cost method, the company calculates a new average cost after every purchase is made. It is determined by dividing the cost of goods available for sale by the units on hand.

To record: inventory, purchase and cost of merchandise sold data in perpetual inventory record.

Explanation of Solution

Figure (1)

Working notes:

Calculate the weighted average unit cost as follows: (Jan 10)

Weighted average method
Quantity Unit cost Total cost of inventory in hand  
7,500 units $75 $562,500  
22,500 units $85 $1,912,500  
30,000 units   $2,475,000  

Table (1)

Weighted average unit cost = Total cost of inventory in handTotal quantity=$2,475,00030,000=$82.50 (1)

Calculate the weighted average unit cost as follows: (Feb 10)

Weighted average method
Quantity Unit cost Total cost of inventory in hand  
13,500 units $82.50 $1,113,750  
54,000 units $87.50 $4,725,000  
67,500 units   $5,838,750  

Table (2)

Weighted average unit cost = Total cost of inventory in handTotal quantity=$5,838,75067,500=$86

Expert Solution

(2)

To determine

To calculate: the sales and cost of merchandise sold accounts and gross profit.

Expert Solution

(3)

To determine

To calculate: Ending inventory cost for the period.

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Chapter 7 Solutions

Accounting
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