Exercise 6-16 Kaleta Company reports the following for the month of June. Assume
ID: 2513654 • Letter: E
Question
Exercise 6-16
Kaleta Company reports the following for the month of June.
Assume a sale of 788 units occured on June 15 for selling of price $9 and a sale of 644 units on June 27 for $10.
Calculate cost of goods available for sale
Calculate Moving-Average unit cost for June 1, 12,15, 23 &27 (Round answers to 3 decimal places, e.g. 2.525.)
Calulate the cost of the ending inventory and the cost of goods sold for each cost flow assumption, using a perpetual inventory system. Assume a sale of 788 units occured on June 15 for a selling price of $9 and a sale of 644 units on June 27 for $10. (Round answers to 0 decimal places, e.g. 1,250)
Date Explanation Units Unit Cost Total Cost June1 Inventory 358 $6 $2,148 12 Purchase 716 7 5,012 23 Purchase 537 8 4,296 30 Inventory 179Explanation / Answer
1) The cost of goods available for sale = Cost of Beg Inventory+Purchase on June 12+Purchase on June 23
= $2,148+$5,012+$4,296 = $11,456
2) Calculation of Moving Average Cost per unit (Amounts in $)
3) FIFO Method
Under FIFO, the ending inventory of 179 units will be from units purchased on June 23 at $8 per unit.
Cost of Ending Inventory = 179 units*$8 = $1,432
Cost of goods sold = (358 units*$6)+(716 units*$7)+[(537-179)*$8]
= $2,148+$5,012+$2,864 = $10,024
LIFO Method
Under LIFO, 788 units sold on June 15 will include 716 units purchased on June 12 and balance 72 units (788-716) from beginning inventory. 644 units sold on June 27 will include 537 units purchased on June 23 and balance 107 units (644-537) from beginning Inventory. Therefore ending inventory of 179 units will be from beginning inventory at $6 per unit.
Cost of Ending Inventory = 179 units*$6 = $1,074
Cost of goods sold = (716 units*$7)+[(72+107) units*$6]+(537 units*$8)
= $5,012+$1,074+$4,296 = $10,382
Moving Average Cost
Cost of Ending Inventory = (179 units*$7.537) = $1,349
Cost of goods sold = Sold on June 15+Sold on June 27
= $5,253+$4,854 = $10,107
Date Particulars Units Balance in units (A) Cost Balance in Cost (B) Moving Average (B/A) June 1 Inventory 358 358 2,148 2,148 6 June 12 Purchased 716 (358+716) = 1,074 5,012 ($2,148+$5,012) = $7,160 6.667 June 15 Sold 788 (1,074-788) = 286 (788*6.667) = 5,253 ($7,160-$5,253) = $1,907 6.667 June 23 Purchased 537 (286+537) = 823 4,296 ($1,907+$4,296) = $6,203 7.537 June 27 Sold 644 (823-644) = 179 (644*7.537) = 4,854 ($6,203-$4,854) = $1,349 7.537