Reference no: EM132618812
Question - Nomad Company uses a perpetual inventory system and had the following goods available for sale in August 2020:
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DATE DESCRIPTION
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#of units
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Unit Cost
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Total Cost
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August 1 Beginning Inventory
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3,500
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$11.00
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$38,500
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August 15 Purchases
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2,500
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$13.00
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$32,500
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On August 10th, 3,000 units were sold and on August 25th, 2,000 units were sold. All goods were sold at a unit selling price of $25.00.
REQUIRED - You must show your calculations. Round to two decimal places.
A. Determine the cost of goods sold for August using the first-in, first-out (FIFO) cost formula.
B. Determine the cost of goods sold for August using the weighted average cost formula.
C. Which of the two cost formulas results in the highest gross margin for August? Will this always be the case?
D. On September 1, 2020, management finds 200 units of damaged inventory. Management estimates that the damaged units will only be sold for $10 per unit, and this will be after spending $1 per unit for clean-up, to get them ready for sale. Provide the required adjusting journal entry. [Assume the FIFO cost formula has been used.]
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