Question

question: please kindly be original no copying words or I will get 0 :) thank you in advance.

A company that uses a perpetual inventory system made the following cash purchases and sales.  There was no beginning inventory.

January 1:	Purchased 30 units at SAR11 per unit
February 5:	Purchased 30 units at SAR 13 per unit
March 16:	Sold 50 Units for SAR 15 per unit

A.Prepare general journal entries to record the March 16 sale using the

1. FIFO inventory valuation method.
2. LIFO inventory valuation method.
3. Weighted average valuation method.

B. What is the cost of goods sold and the gross margin for each method? (2Marks)

Answer 1

A.

1. FIFO

	Debit	Credit
Cash Dr.	750
To sales revenue		750
Cost of goods sold Dr. [30 x 11] + [20 x 13]	590
To inventory		590

2. LIFO

	Debit	Credit
Cash Dr.	750
To sales revenue		750
Cost of goods sold Dr. [30 x 13] + [20 x 11]	610
To inventory		610

3. Weighted average

Weighted average cost per unit = [(30 x 11) + (30 x 13)]/ (30 + 30)

= (330 + 390)/ 60

= $12 per unit

	Debit	Credit
Cash Dr.	750
To sales revenue		750
Cost of goods sold Dr. [12 x 50]	600
To inventory		600

B.

FIFO:

Cost of goods sold (mentioned above) = 590

Gross margin = Sales - Cost of goods sold

= 750 - 590

= 160

LIFO:

Cost of goods sold (mentioned above) = 610

Gross margin = Sales - Cost of goods sold

= 750 - 610

= 140

Weighted average:

Cost of goods sold (mentioned above) = 600

Gross margin = Sales - Cost of goods sold

= 750 - 600

= 150