Question

Altira Corporation uses a perpetual inventory system. The following transactions affected its merchandise inventory during the month of August 2016: Aug.1 Inventory on hand—4,000 units; cost $8.10 each. 8 Purchased 20,000 units for $7.50 each. 14 Sold 16,000 units for $14.00 each. 18 Purchased 12,000 units for $7.00 each. 25 Sold 15,000 units for $13.00 each. 31 Inventory on hand—5,000 units.

Required:
Determine the inventory balance Altira would report in its August 31, 2016, balance sheet and the cost of goods sold it would report in its August 2016 income statement using each of the following cost flow methods: (Round "Average Cost per Unit" to 2 decimal places.)

Answer 1

-The inventory balance Altira would report in its August 31, 2016: $36,200

-The cost of goods sold it would report in its August 2016: $230,200

Step-by-step explanation:

Aug.1 Cost of each inventory $8.10 ( given in question)

Aug.8 Cost of each inventory (20,000 x 7.5) + (8.1 x 4,000) / 24,000 = $7.6; Inventory outstanding = 4,000 + 20,000 = 24,000 units

Aug.14 Cost of good sold = Cost of each inventory x units sold = 7.6 x 16,000 = $121,600 (1); Inventory outstanding = 24,000 - 16,000 = 8,000 units

Aug.18 Cost of each inventory (8,000 x 7.6) + (12,000 x 7) / 20,000 = $7.24; Inventory outstanding = 8,000 + 12,000 = 20,000 units

Aug.25 Cost of good sold = Cost of each inventory x units sold = $7.24 x 15,000 = $108,600 (2); Inventory outstanding = 20,000 - 15,000 = 5,000 units

=> Balance of Inventory at Aug 31st 16 = 5,000 x 7.24 = $36,200

Cost of good sold = (1) + (2) = $230,200.