What is the cost of inventory of Z Company on December 31? What amount of cost of goods sold should Z Company report for the current year?What is the estimated cost of inventory using the average retail? Situation 1 Z Company provided the following data connected to its inventory transactions:Date and TransactionUnitsUnit Cost40,00030,000January 1 balanceP20February 10 saleApril 12 purchaseSeptember 20 saleNovember 28 purchase60,000P2559,00040,000P30The entity used the weighted average method. At December 31, the entity determined that the NRV per unitis P23.Situation 2 An entity used the average cost retail method to estimate its inventory. Date relating to theinventory on December 31, 2020 are:CostRetailInventory, January 11,000,0001,500,000Purchases5,300,0007,000,000Net markupNet markdown800,000300,000Sales6,000,000Estimated normal shoplifting lossesEstimated normal shrinkage is 5% of sales200,000

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Description: What is the cost of inventory of Z Company on December 31? What amount of cost of goods sold should Z Company report for the current year?What is the estimated cost of inventory using the average retail? Situation 1 Z Company provided the following d

In weighted average method of inventory valuation, the price of the inventory is based on…

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What is the cost of inventory of Z Company on December 31? What amount of cost of goods sold should Z Company report for the current year?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Question

What is the cost of inventory of Z Company on December 31?

What amount of cost of goods sold should Z Company report for the current year?

What is the estimated cost of inventory using the average retail?

Situation 1 Z Company provided the following data connected to its inventory transactions:
Date and Transaction
Units
Unit Cost
40,000
30,000
January 1 balance
P20
February 10 sale
April 12 purchase
September 20 sale
November 28 purchase
60,000
P25
59,000
40,000
P30
The entity used the weighted average method. At December 31, the entity determined that the NRV per unit
is P23.
Situation 2 An entity used the average cost retail method to estimate its inventory. Date relating to the
inventory on December 31, 2020 are:
Cost
Retail
Inventory, January 1
1,000,000
1,500,000
Purchases
5,300,000
7,000,000
Net markup
Net markdown
800,000
300,000
Sales
6,000,000
Estimated normal shoplifting losses
Estimated normal shrinkage is 5% of sales
200,000

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