Reference no: EM131745898

Weighted Average Cost Method with Perpetual Inventory
The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are as follows:
Jan. 1 Inventory 7,500 $75.00 $562,500
10 Purchase 22,500 85.00 1,912,500
28 Sale 11,250 150.00 1,687,500
30 Sale 3,750 150.00 562,500
Feb. 5 Sale 1,500 150.00 225,000
10 Purchase 54,000 87.50 4,725,000
16 Sale 27,000 160.00 4,320,000
28 Sale 25,500 160.00 4,080,000
Mar. 5 Purchase 45,000 89.50 4,027,500
14 Sale 30,000 160.00 4,800,000
25 Purchase 7,500 90.00 675,000
30 Sale 26,250 160.00 4,200,000

Required:

1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in Exhibit 5, using the weighted average cost method. Round unit cost to two decimal places, if necessary. Round all total cost amounts to the nearest dollar.

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1. When the perpetual inventory system is used, revenue is recorded each time a sale is made along with an entry to record the cost of the goods sold. Under the weighted average method the average unit cost must be determined after each purchase by dividing the total of cost of goods on hand by the total units on hand. The cost of goods sold is computed multiplying the average unit cost on the date of sales by the units sold. The inventory balance after a sale is computed by multiplying the average unit cost by the units on hand.

2. Total sales are obtained by taking the number of units sold times their sale prices for all sales and adding these amounts together. The total cost of goods sold can be obtained by adding the costs in the perpetual inventory record. Sales minus cost of goods sold equals gross profit.

3. The ending inventory cost can be taken from the perpetual inventory record in Part (1).