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Homework answers / question archive / Tresore Ltd
Tresore Ltd. is a merchandising company that sells mini radios. At December 31, 20x8 , 2,000 mini radios were still on hand at a unit cost of $9.00. You obtain the following information from Tresore Ltd. for the month of January, 20x9: Date Description Quantity (units) Unit cost/selling price January 4 Purchase #1 2,500 $9.50 January 10 Sale #1 1,500 $12.00 January 15 Purchase #2 2,400 $10.00 January 20 Sale #2 2,000 $13.00 January 28 Sale #3 2,800 $13.00 January 31 Purchase#3 1,500 $10.00 Assume that Tresore Ltd. prepares monthly financial statements and uses the periodic weighted average method. Required - Prepare the journal entry required on January 31, 20x9 to record the cost of goods sold. Use four decimal places when calculating unit costs.
Answer is as follows:
Formula for computing weighted average cost of inventory under periodic system is:
= Total Cost of Units / Total no. of Units
Date Description Quantity(a) Unit Cost(b) Total Cost (a*b)
Jan 4 Purchases 2500 $9.50 $23750
Jan 15 Purchases 2400 $10.00 $24000
Jan 31 Purchases 1500 $10.00 $15000
Total 6400 units $62750
Weighted Average Cost = $62750 / 6400 units
= $9.8047 per unit
Sales in units = 1500(jan 10) + 2000(jan 20) + 2800(jan 28) = 6300 units
Cost of Goods Sold = Sales in Units * Weighted Average Cost
= 6300 units * $9.8047
= $61769.61
Entry on January 31, 20X9:
Cost of Goods Sold A/C Dr $61769.61
To Merchandise Inventory A/C $61769.61
