Question

Calculate ending inventory and cost of goods sold for 2015, assuming the company uses specific identification. Actual sales by the company include its entire beginning inventory, 230 units of inventory from the May 5 purchase, and 180 units from the November 3 purchase.
During 2015, Wright Company sells 470 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for 2015.

Date Transaction Number of Units Units Cost Total Cost
Jan. 1 Beginning inventory 60 $82 $4920
May 5 Purchase 250 85 21,250
Nov. 3 Purchase 200 90 18,000
510 $44170

Required:
Calculate ending inventory and cost of goods sold for 2015, assuming the company uses FIFO.

Answer 1

Answer:

The value of closing inventory is $3,500

Cost of goods sold $40,670

Explanation:

The two tasks here is to compute the value of closing inventory and the costs of goods sold during the year.

The fact that all opening inventory units were sold and that 230 units out of 250 units bought on May 5 leaves 20 units of that batch inventory in closing inventory.

Also, 20 units of 200 units bought on November 3 in inventory since 180 units were already sold.

Hence the value of closing inventory is computed thus:

May 5 20*$85=$1,700

Nov 3 20*$90=$1,800

Total               $3,500

The costs of goods sold are is computed thus:

Opening inventory 60*$82 $4,920

May 5 230*$85                 $19,550  

Nov 3 180*$90                  $ 16,200  

Total                                   $40,670