Current & Non Current Assets

INVENTORY – PERIODIC INVENTORY SYSTEM

In a Periodic Inventory System, no effort is made to keep up – to – date records of either the inventory or the cost of goods sold. Instead, these amounts are determined only periodically __ usually at the end of each year. It is used by very small businesses having manual accounting systems.

Questions 1 – 3 (Meigns & Meigns), Question 4 (Fess & Warren)

Question 1:- Mach IV Audio uses periodic inventory system. One of the store’s most popular products is a minidisc car stereo system. The inventory quantities, purchases, and sales of this product for the most recent year are as follows:

| Number of units | Cost per unit | Total Cost | Inventory – Jan 01 | 10 | Rs.299 | Rs. 2990 | Purchases – May 12 | 15 | 306 | 4590 | Purchases – July 09 | 20 | 308 | 6160 | Purchases – Oct 04 | 8 | 315 | 2520 | Purchases – Dec - 18 | 19 | 320 | 6080 | Goods available for sale | 72 | | Rs. 22340 | Units sold during the year | 51 | | | Inventory | 21 | | |

Instructions: Compute the cost of December 31 inventory and the cost of goods sold for the above mentioned product under each of the following cost flow assumptions: a. First-in, first-out b. Last-in, first-out c. Average cost (round to the nearest rupee, except unit cost)

Question 2: - Same three inventory valuation methods under periodic inventory system | Number of units | Cost per unit | Total Cost | Inventory – Jan 01 | 9 | Rs. 3.00 | Rs. 27.00 | Purchases 1 | 12 | 3.50 | 42.00 | Purchases 2 | 30 | 3.80 | 114.00 | Purchases 3 | 40 | 4.00 | 160.00 | Purchases 4 | 19 | 5.00 | 95.00 | Goods available for sale | 110 | | Rs.438.00 | Units sold during the year | | | | Inventory – Dec 31 | 20 | | |

Question 3: - Same three inventory valuation methods