Question

Exercise 8-14 Inventory cost flow methods; perpetual system [LO8-1, 8-4] Altira Corporation uses a perpetual inventory system. The following transactions affected its merchandise inventory during the month of August 2018: Aug.1 Inventory on hand—2,100 units; cost $6.20 each. 8 Purchased 10,500 units for $5.60 each. 14 Sold 8,400 units for $12.10 each. 18 Purchased 6,300 units for $5.40 each. 25 Sold 7,400 units for $11.10 each. 31 Inventory on hand—3,100 units. Exercise 8-14 Part 1 Required: 1. Determine the inventory balance Altira would report in its August 31, 2018, balance sheet and the cost of goods sold it would report in its August 2018 income statement using the FIFO method. (Round "Cost per Unit" to 2 decimal places.)

Answer 1

Answer:

a. The inventory balance Altira would report in its August 31, 2018, balance sheet is $16,740.

b. Cost of good sold = $89,100

Explanation:

a. Determine the inventory balance Altira would report in its August 31, 2018, balance sheet

Based on FIFO method, we have:

Inventory 8,400 sold on Aug. 14 = 2,100 units from Aug. 1 beginning balance+ 6,300 units from Aug. 8 Purchases

Aug. 8 purchases balance after the Agug 14. sales = 10,500 - 6,300 = 4,200 units

Inventory 7,400 sold on Aug. 25 = 4,200 from Aug. 8 balance+ 3,200 from Aug. 18 Purchases

Aug. 18 purchases balance after the Agug 25. sales = 6,300 - 3,200 = 3,100 units

Value of closing inventory = 3,100 * 5.40 = $16,740

Therefore, the inventory balance Altira would report in its August 31, 2018, balance sheet is $16,740.

b. Determine the cost of goods sold it would report in its August 2018 income statement using the FIFO method.

Beginning inventory value = 2,100 * 6.20 = $13,020

Value of purchases = (10,500 * $5.60) + (6,300 * $5.40) = $92,820

Value of closing inventory = $16,740

Cost of good sold = $13,020 + $92,820 - $16,740 = $89,100