Problem A Inventory Record Method

The following data relate to the beginning inventory, purchases, and sales of Braxton Company for the year:

Units Unit Cost

Mdse Inventory, Jan 1

1,400at$5.04each Purchases: February 21,000at$4.80each April 52,000at$3.60each June 151,200at$3.00each September 301,400at$2.88each November 281,800at$4.20each Sales:Remember, selling price is not used in calculating cost of goods sold. March 10900 May 151,800 July 6800 August 23600 December 222,500

Using perpetual inventory procedure and the INVENTORY RECORD FORMAT, compute the cost of goods sold for each sale and the ending inventory as of December 31 under Weighted Average, FIFO, and LIFO methods.

Weighted Average (or Avg Cost) Method

Avg Cost Calculated as Total Cost / Total Units

(carry unit cost to four decimal places and round total cost to nearest dollar)

DatePurchasesCost of Goods SoldInventory Balance UnitUnit CostTotal CostUnitAvg CostTotal CostTotal CostTotal UnitsAvg Cost 1-Jan 7,0561,4005.04 2-Feb1,0004.84,800 10-Mar 900 5-Apr2,0003.67,200 15-May 1,800 15-Jun1,20033,600 6-Jul 800 23-Aug 600 30-Sep1,4002.884,032 28-Nov1,8004.27,560 22-Dec 2,500 TOTAL0 FIFO Method DatePurchasesCost of Goods SoldInventory Balance UnitUnit CostTotal CostUnitUnit CostTotal CostTotal UnitsUnit CostTotal Cost 1-Jan 1,400$5.047,056

This one completed for you as example of how you should complete the Inventory Balance which shows ALL inventory on hand on that date.

2-Feb1,0004.84,800 1,400$5.047,056 1,000$4.804,800 2,400 11,85610-Mar 5-Apr2,0003.67,200 15-May 15-Jun1,20033,600 6-Jul 23-Aug 30-Sep1,4002.884,032 28-Nov1,8004.27,560 22-Dec Total Cost of Goods Sold LIFO Method DatePurchasesCost of Goods SoldInventory Balance UnitUnit CostTotal CostUnitUnit CostTotal CostTotal UnitsUnit CostTotal Cost 1-Jan 2-Feb 10-Mar 5-Apr 15-May 15-Jun 6-Jul 23-Aug 30-Sep 28-Nov 22-Dec Total Cost of Goods Sold

Notice how the Inventory available is the same under each method but the amount of Cost of Goods Sold and Ending Inventory are different.

Enter amounts calculated above in your Inventory Records for each method! Cost ofEnding InventoryTotal Inventory Available

Goods Sold

UnitsAmount(COGS + End. Inventory Amount) Weighted Average 0 FIFO 0 LIFO 0

Can a company change inventory methods from year to year if they want? How would they do this?