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26 November, 18:34

Mercer Inc. is a retailer operating in British Columbia. Mercer uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory; the inventory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Mercer Inc. for the month of January 2014.

Date Description Quantity Unit Cost

Jan 1 Beginning inventory 280 $14

Jan 5 Purchase 392 $17

Jan 8 Sale 308 $28

Jan 10 Sale return 28 $28

Jan 15 Purchase 154 $20

Jan 16 Purchase return 14 $20

Jan 20 Sale 252 $31

Jan 25 Purchase 56 $22

a. Calculate the Moving-average cost per unit at January 1, 5, 8, 15, 20, & 25.

b. For each of the following cost flow assumptions, calculate cost of goods sold, ending inventory, and gross profit. (1) LIFO. (2) FIFO. (3) Moving-average cost.

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  1. 26 November, 19:02
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    Date Description Quantity Unit Cost Total Cost

    Jan 1 Beginning inventory 280 $14 $ 3920

    Jan 5 Purchase 392 $17 $ 6644

    Jan 8 Sale 308 $28 $ 8624

    Jan 10 Sale return 28 $28 $ 784

    Jan 15 Purchase 154 $20 $ 3080

    Jan 16 Purchase return 14 $20 $ 280

    Jan 20 Sale 252 $31 $ 7812

    Jan 25 Purchase 56 $22 $ 1232

    Total Units 868 at $ 14596

    Average Cost = $ 16.82

    Moving Average Cost Method

    Date Description Quantity Unit Cost Balance

    Jan 1 Beginning inventory 280 $14 $ 3920

    Jan 5 Purchase 392 $17 $ 6644

    Units 672 $ 10564 15.72

    Jan 8 Sale 308 $28 $ 8624

    Units 364 15.72 5722.17

    Jan 10 Sale return 28 $28 $ 784

    Jan 15 Purchase 154 $20 $3080

    Units 546 9586.17 17.55

    Jan 16 Purchase return 14 $20 $280

    Jan 20 Sale 252 $31 $7812

    Units 280 17.55 4914

    Jan 25 Purchase 56 $22 $1232

    Units 336 6146 $ 18.29

    Moving-average cost Ending Inventory = $ 6164

    Ending Units 336

    FIFO Ending Inventory = $ 6454

    56 units at $22 = $ 1232

    154 units at $20 = $ 3080

    126 units at $17 = $ 2142

    LIFO Ending Inventory = $ 4872

    280 units at $14 = $ 3920

    56 units at $17 = $ 952

    Gross Profit Inventory = $ 16.82 * 336 = $ 5651.52

    Moving Average Cost = 336 * 18.29 = $ 6146

    FIFO Cost of Goods Sold = Total Sales - Ending Inventory FIFO

    =8624-784 + 7812 - 6454

    =15652 - 6454 = $ 9198

    LIFO Cost of Goods Sold = Total Sales - Ending Inventory LIFO

    = 15652 - 4872=$ 10780

    Gross Profit Cost of Goods Sold = Total Sales - Ending Inventory Gross Profit = 15652 - 5651.52 = $ 10,000.48

    Moving-average cost Cost of Goods Sold = Sales - Ending Inventory=

    15652-$ 6164 = $ 9488

    Gross Profit:

    1) LIFO = 4872

    2) FIFO = 6454

    3) Moving Average 6164
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