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Chapter 6: 6SE_1 (page 359)

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries鈥� Weighted-average

Requirements

1. Prepare Boston Cycle鈥檚 perpetual inventory record assuming the company uses theweighted-average inventory costing method.

Short Answer

Expert verified

The cost of goods sold under the weighted average method amounts to$2,108.

Step by step solution

01

Step-by-Step-SolutionStep1: Weighted Average costing method

The weighted average costing method evaluated the inventory based on the weighted average price of all the available inventory. Under this method, the cost of goods sold and ending inventory values falls at the midpoint between the FIFO and LIFO inventory value.

02

Perpetual inventory record based on the weighted average method

Date

Purchase / Opening inventory

Sale

Balance

Unit

Cost

Amount

Unit

Cost

Amount

Unit

Cost

Amount

Oct 1

12

$42

$504

12

$42

$504

Oct 16

40

$68

$2,720

52

$62

$3,224

Oct 31

34

$62

$2,108

18

$62

$1,116

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Most popular questions from this chapter

Nature Foods Grocery reported the following comparative income statements for the years ended June 30, 2019 and 2018:

NATURE FOODS GROCERY
Income Statements
Years Ended June 30, 2019 and 2018

2019

2018

Net Sales Revenue

\( 134,000

\) 119,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\(17,000

\)14,000

Net Cost of Purchases

78,000

67,000

Cost of Goods Available for Sale

95,000

81,000

Less: Ending Merchandise Inventory

18,000

17,000

Cost of Goods Sold

77,000

64,000

Gross Profit

57,000

55,000

Operating Expenses

26,000

21,000

Net Income

\( 31,000

\) 34,000

During 2019, Nature Foods Grocery discovered that ending 2018 merchandise inventory was overstated by $5,500.

Requirements

2. State whether each year鈥檚 net income鈥攂efore your corrections鈥攊s understated or overstated, and indicate the amount of the understatement or overstatement.

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

How is days鈥� sales in inventory calculated, and what does it measure?

Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:

Oct. 3 35 units @ \) 82 each

12 45 units @ \( 84 each

18 75 units @ \) 90 each

Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.

Requirements

3. Which method will result in the lowest income taxes for Right Now? Why? Whichmethod will result in the highest net income for Right Now? Why?

Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

4. Which method results in a higher cost of ending merchandise inventory?
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