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Q29PGA_3

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Horngren'S Financial And Managerial Accounting
Found in: Page 367

Short Answer

Steel Mill began August with 50 units of iron inventory that cost $35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 $ 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-average inventory costing method.

The ending inventory at average cost comes out to be $1,400.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Weighted average costing method

The weighted average costing method is the mid-way between the FIFO method and the LIFO method. In the weighted average method, the average cost is computed after every purchase, and the goods are sold on the immediate average cost. The average cost is the mean value of FIFO cost and LIFO cost.

Step 2: Perpetual inventory table under the weighted average method

PurchasesCost of goods soldInventory on hand

Date

Qty

Unit cost

Total Cost

Qty

Unit cost

Total Cost

Qty

Unit Cost

Total Cost

Aug 1

50

$35

$1,750

Aug 3

45

$35

$1,575

5

$35

$175

Aug 8

90

$54

$4,860

95

$53

$5,035

Aug 21

85

$53

$4,505

10

$53

$530

Jan 26

15

$58

$870

25

$56

$1,400

Total

105

$5,730

130

$6,080

25

$56

$1,400

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