Question

Assume that we use a perpetual inventory system and that five identical units are purchased at the following four dates and costs:
April 5 $10
April 10 $12
April 15 $14
April 20 $16
April 22 $17
One unit is sold on April 25. The company uses the weighted average inventory costing method.
Identify the cost of the ending inventory on the balance sheet.
Cost of the ending inventory

Answer 1

The cost of ending inventory at the conclusion of an accounting period is calculated using the weighted average inventory costing method.

How is the cost of discontinuing inventory calculated?

• The cost of ending inventory at the conclusion of an accounting period is calculated using the weighted average inventory costing method. The idea behind this approach is to give all inventory units an average cost.
• In this scenario, the average of the purchase costs from April 5 to April 22 would be taken and multiplied by the number of remaining units to get the cost of the ending inventory on the balance sheet.
• The five pieces cost a total of $69 ($10 + $12 + $14 + $16 + $17) between April 5 and April 22. The remaining four units would make up the ending inventory as one unit was sold on April 25.
• Therefore, $17.25 ($69 divided by 4) would be the price of the closing inventory. As the cost of the ending inventory, this sum would be shown on the balance sheet.

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