Question

During January, LexPro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:

Unit Total Units
Units Cost Cost On hand
Balance on 1/1 1,000 $1 $1,000 1,000
Purchased on 1/7 600 3 1,800 1,600
Sold on 1/20 900 700
Purchased on 1/25 400 5 2,000 1,100

Under the moving-average method, what amount should LexPro report as inventory at January 31?

Answer 1

Answer:

$3,225

Explanation:

The computation of the amount reported as an ending inventory is shown below:

Date Particulars Units   Cost Amount                

1 -1        Op Balance     1,000         $1            $1,000  

1 -7         Purchases      600          $3             $1,800

Total                              1,600    $1.75         $2,800  

                                              ($2,800 ÷ 1,600 units)  

1 -20 COGS           900      $1.75            $1,575

Total                              700     $1.75            $1,225

1 -25       Purchases     400     $5                 $2,000

Ending inventory         1,100    $2.9318       $3,225

                                                  ($3,225 ÷ 1,100 units)  

We simply added the purchase units with the opening balance and deduct the cost of goods sold units from the opening balance so that the correct ending inventory amount could arrive