Question

Sment / ACCT100 Assessment 3

Answer 1

Answer:

The value of closing inventory using FIFO under perpetual inventory system is $9379

Explanation:

The FIFO or first in first out method is a method of inventory valuation which basis the value of ending inventory on the assumption that the inventories that were purchased first were the ones that were sold first and the closing or ending inventory is comprised of the most recent purchases.

The perpetual method of inventory recording makes real time record and changes in the inventory level as soon as a transaction relating to inventory occurs.

The ending inventory of the business can be calculated as follows:

Transaction                                      Purchases          Sale            Balance

1. Opening Inventory (100 * 103)                                                      10300

2. July 10 purchase (150 * 91)             13650                                   23950

3. July 15 sale (100*103 + 73*91)                                16943            7007

4. July 22 purchase (200 * 113)          22600                                  29607                        

5. July 30 sale (77*91 + 117*113)                                 20228           9379

Totals                                                  36250             37171              9379

• The value of closing inventory is $9379.

• The sale made on July 15 was made through using 100 units of opening inventory at a cost of $103 per unit and 73 units from July 10 purchases at $91 per unit.
• The sale made on July 30 was made through using the remaining units of July 10 purchases (150 - 73 = 77) at $91 per unit and using the units from July 22 purchase (194 - 77 = 117) at $113 per unit.
• The closing inventory in units is = 200 - 117 = 83
• The cost of closing inventory is 83 * 113 = $9379