Question

Sment / ACCT100 Assessment 3

Superhub Ltd carries an inventory of a type of electrical device for electrician. The store uses the FIFO method and a perpetual inventory
system. Business records indicate the following transactions for the device.
July 1 (beginning): the store had 100 units of device costing $103 each
July 10: 150 devices were purchased each costing $91
July 15: 173 devices were sold
July 22: 200 devices were bought for $113 each.
July 30: 194 devices were sold
Determine the amounts of Superhub Ltd's ending inventory (at 31 July) in the month of July using the FIFO method.
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Answer:
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Answer 1

The value of closing inventory using FIFO under perpetual inventory system is $9379

Step-by-step explanation:

The FIFO or first in first out method is a method of inventory valuation which basis the value of ending inventory on the assumption that the inventories that were purchased first were the ones that were sold first and the closing or ending inventory is comprised of the most recent purchases.

The perpetual method of inventory recording makes real time record and changes in the inventory level as soon as a transaction relating to inventory occurs.

The ending inventory of the business can be calculated as follows:

Transaction Purchases Sale Balance

1. Opening Inventory (100 * 103) 10300

2. July 10 purchase (150 * 91) 13650 23950

3. July 15 sale (100*103 + 73*91) 16943 7007

4. July 22 purchase (200 * 113) 22600 29607

5. July 30 sale (77*91 + 117*113) 20228 9379

Totals 36250 37171 9379

• The value of closing inventory is $9379.

• The sale made on July 15 was made through using 100 units of opening inventory at a cost of $103 per unit and 73 units from July 10 purchases at $91 per unit.
• The sale made on July 30 was made through using the remaining units of July 10 purchases (150 - 73 = 77) at $91 per unit and using the units from July 22 purchase (194 - 77 = 117) at $113 per unit.
• The closing inventory in units is = 200 - 117 = 83
• The cost of closing inventory is 83 * 113 = $9379