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Compute the new ending inventory cost

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Question - CBA Ltd sells smartphones. The following information relates to its best-selling model Tex for the month of January 2022.

Jan 1 Beginning inventory of 10 units at $300 per unit

Jan 5 Purchased 30 units at $280 per unit

Jan 8 Purchased 20 units at $270 per unit

Jan 10 Sold 10 units at $350 per unit

Jan 20 Purchased 50 units at $245 per unit

Jan 21 Returned 10 units purchased on Jan 20

Jan 25 Sold 35 units at $340 per unit

The company uses the perpetual inventory system and FIFO method to account for its inventories.

(a) Present the cost of goods sold for the month ending January 2022 and ending inventory cost on 31 January 2022. You have to show the inventory movements and balance for each transaction.

(b) The company is considering weighted-average method to account the inventories. Explain without computations whether FIFO method or weighted-average method will give a higher gross profit for January 2022. You have to discuss both methods in your answer.

(c) Due to some defects, it is estimated that the remaining inventories at end of January 2022 can be sold for only $230 each (assumes no selling costs). Compute the new ending inventory cost on 31 January 2022 and new gross profit for January 2022.

Reference no: EM133135109

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