Reference no: EM132462953
Problem -
Part I - Jason Company uses a perpetual inventory system and reported the following transactions involving inventory during the month of December 2018:
December 1
|
Beginning inventory
|
100 units
|
@ $8.00
|
December 4
|
Purchases
|
200 units
|
@ $8.25
|
December 13
|
Sales
|
150 units
|
@ $11.20
|
December 21
|
Purchases
|
300 units
|
@ $8.50
|
December 26
|
Sales
|
375 units
|
@ $11.20
|
December 30
|
Purchases
|
400 units
|
@ $8.75
|
Required - Show all workings and rounded amounts to one decimal place of a dollar.
a. Calculate the Cost of Goods Sold and Ending Inventory as of December 31, 2018 using First-In-First-Out (FIFO) method.
b. Calculate the Cost of Goods Sold and Ending Inventory as of December 31, 2018 using Weighted Average Cost method.
Part II - Financial analysts and investors are very interested in how quickly a company is turning over its inventory as quick turnover yields higher profits. There are events that may have an effect on the inventory turnover ratio.
Required - For each of the following two events, indicate and explain whether inventory turnover would increase, decrease or not be affected.
a. Change from Weighted Average Cost method to First-In, First-Out method during an inflationary environment.
b. Cut sales prices in order to increase sale.