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13 November, 03:11

In its first month of operations, Literacy for the Illiterate opened a new bookstore and bought merchandise in the following order: (1) 300 units at $5 on January 1, (2) 500 units at $9 on January 8, and (3) 910 units at $10 on January 29. Assume 1,110 units are on hand at the end of the month. Calculate the cost of goods available for sale, cost of goods sold, and ending inventory under the (a) FIFO, (b) LIFO, and (c) weighted average cost flow assumptions. Assume perpetual inventory system and sold 600 units between January 9 and January 28. (Round your intermediate calculations to 2 decimal places.)

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  1. 13 November, 03:41
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    Explanation:

    January 1 300 units at $5 $1,500

    January 8 500 units at $9 $4,500

    January 29 910 units at $10 $9,100

    1,110 units are available at the end of the month. That means 600 units were sold

    A. Under FIFO

    1. Cost of goods available for sale:

    $1,500 + $4,500 + $9,100 = $15,100

    2. Cost of goods sold

    300 units at $5 $1,500

    300 units at $9 $2,700

    Total $4,200

    3. Ending inventory

    200 units at $9 $1,800

    910 units at $10 $9,100

    Total $10,900

    B. Under LIFO (Last in First Out)

    1. Cost of goods available for sale:

    $1,500 + $4,500 + $9,100 = $15,100

    2. Cost of goods sold

    600 units at $10 $6,000

    Total $6,000

    3. Ending inventory

    310 units at $10 $3,100

    500 units at $9 $4,500

    300 units at $5 $1,500

    Total $9,100

    C. Weighted average cost flow assumption: Cost of goods available for sale / total units

    1. Cost of goods available for sale:

    $1,500 + $4,500 + $9,100 = $15,100

    2. Cost of goods sold

    $15,100 / 1,710 = $8.83

    $8.83 x 600 = $5,298

    3. Ending inventory

    $8.83 x 1,110 = $9,801.3

    Under perpetual Inventory System

    Between January 9 and January 28. The prevailing price that will be used to sell the inventory will be the price at January 8 ($9)

    1. Cost of goods available for sale:

    $1,500 + $4,500 + $9,100 = $15,100

    2. Cost of goods sold

    600 units at $9 $5,400

    Total $5,400

    3. Ending inventory

    1,110 units at $9 $9,990

    Total $9,990
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