Question 1-3

If Entity A uses the weighted average method for the inventory measurement:

        (1) What is the amount of ending inventory at January 31, 20x1?

        (2) What is the amount of cost of goods sold for January 20x1?

Date

Units

Purchased

Units Sold

Inventory

Cost

per Unit

Amount

1

Beginning inventory

1,000

$50

$50,000

11

Purchased

1,200

$52

$62,400

27

Purchased

1,400

$56

$78,400

Total

3,600

Average

$53

$190,800

16

Sold

1,700

Total

3,600

1,700

Ending inventory

1,900

$53

$100,700

Cost of goods sold

$90,100

        

Calculation of weighted average cost

        Total units purchased = 3,600 units

        Total amount of purchases = $190,800

        Average cost per unit = $190,800 / 3,600 units = $53 per unit

        (1) Ending inventory at January 31, 20x1 = 1,900 units x $53 = $100,700

        (2) Cost of goods sold

                = Beginning inventory + Purchases - Ending inventory

                = $50,000 + $62,400 + $78,400 - $100,700

                = $190,800 - $100,700

                = $90,100