Scrappers Supplies tracks the number of units purchased and sold throughout eachaccounting period but applies its inventory costing method at the end of each period, asif it uses a periodic inventory system. Assume its accounting records provided thefollowing information at the end of the annual accounting period, December 31.Units Unit Cost$30TransactionsBeginning inventory, January 1Transactions during the year:a. Purchase on account, March 2b. Cash sale, April 1 ($46 each)c. Purchase on account, June 30d. Cash sale, August 1 ($46 each)20030032(350)25036(50)TIP: Although the purchases and sales are listed in chronological order, Scrappersdetermines the cost of goods sold after all of the purchases have occurred.Required:1. Compute the cost of goods available for sale, cost of ending inventory, and cost ofgoods sold at December 31 under each of the following inventory costing methods:(Round "Cost per Unit" to 2 decimal places.)a. Last-in, first-out.LIFO (Periodic)UnitsCostGoods Available for SaleCost of Goods SoldEnding Inventory b. Weighted average cost.Weighted Average Cost (Periodic)UnitsCostGoods Available for SaleCost of Goods SoldEnding Inventoryc. First-in, first-out.FIFO (Periodic)UnitsCostGoods Available for SaleCost of Goods SoldEnding Inventory

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Description: Scrappers Supplies tracks the number of units purchased and sold throughout eachaccounting period but applies its inventory costing method at the end of each period, asif it uses a periodic inventory system. Assume its accounting records provided th

Answered: Weighted Average Cost (Periodic) Units…

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

Scrappers Supplies tracks the number of units purchased and sold throughout each
accounting period but applies its inventory costing method at the end of each period, as
if it uses a periodic inventory system. Assume its accounting records provided the
following information at the end of the annual accounting period, December 31.
Units Unit Cost
$30
Transactions
Beginning inventory, January 1
Transactions during the year:
a. Purchase on account, March 2
b. Cash sale, April 1 ($46 each)
c. Purchase on account, June 30
d. Cash sale, August 1 ($46 each)
200
300
32
(350)
250
36
(50)
TIP: Although the purchases and sales are listed in chronological order, Scrappers
determines the cost of goods sold after all of the purchases have occurred.
Required:
1. Compute the cost of goods available for sale, cost of ending inventory, and cost of
goods sold at December 31 under each of the following inventory costing methods:
(Round "Cost per Unit" to 2 decimal places.)
a. Last-in, first-out.
LIFO (Periodic)
Units
Cost
Goods Available for Sale
Cost of Goods Sold
Ending Inventory

b. Weighted average cost.
Weighted Average Cost (Periodic)
Units
Cost
Goods Available for Sale
Cost of Goods Sold
Ending Inventory
c. First-in, first-out.
FIFO (Periodic)
Units
Cost
Goods Available for Sale
Cost of Goods Sold
Ending Inventory

Expert Solution

Step 1 Introduction

Inventory Valuation: It is an asset held for sale in the ordinary course of business. It is used in the process of production for such sale it is consumed in the process of production. Inventory will be valued at cost or net realizable value whichever is lower. It should be valued on an individual item basis and not on a total basis.

Step 2 a) Statement showing the Inventory valuation by Last in first out method

Inventory valuation
Last In First Out method
Date			Receipt		cost of goods sold				Balance
	Particular	Unit	Rate ($)	Amount ($)	Unit	Rate ($)	Amount ($)	Unit	Rate ($)	Amount ($)
1 January	Opening stock	-	-	-	-	-	-	200	30	6,000
2 March	Purchase	300	32	9600	-	-	-	200	30	6,000
		-	-	-	-	-	-	300	32	9600
1 April	Sale	-	-	-	300	32	9,600	150	30	4,500
		-	-	-	50	30	1,500	-	-	-
30 June	Purchase	250	36	9,000	-	-	-	150	30	4,500
		-	-	-	-	-	-	250	36	9,000
1 August	Sale	-	-	-	50	36	1,800	150	30	4,500
		-	-	-	-	-	-	200	36	7,200
		550		18,600	400		12,900	350		11,700

Step 3 a) Answer

LIFO (Periodic)
Particular	Units	Cost
Goods available for sale	550	18,600
Cost of goods sold	400	12,900
Ending Inventory	350	11,700

Step 4 b) Statement showing the Inventory valuation by Weighted average method

Inventory valuation
Weighted average method
Date			Receipt		cost of goods sold				Balance
	Particular	Unit	Rate ($)	Amount ($)	Unit	Rate ($)	Amount ($)	Unit	Rate ($)	Amount ($)
1 January	Opening stock	-	-	-	-	-	-	200	30	6,000
2 March	Purchase	300	32	9600	-	-	-	300	32	9600
		-	-	-	-	-	-	500	31.2	15,600
1 April	Sale	-	-	-	350	31.2	10,920	150	31.2	4,680
		-	-	-				-	-	-
30 June	Purchase	250	36	9,000	-	-	-	150	31.2	4,680
		-	-	-	-	-	-	250	36	9,000
								400	34.2	13,680
1 August	Sale	-	-	-	50	34.2	1,710	350	34.2	11,970
		550		18,600	400		12,630	350		11,970

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