Question

Chicago Oat Company buys and sells steel cut oats. Below is the January 2020 activity related to inventory for bags of organic oats.

Purchases
Date	Quantity	Total Purchase Price
Beginning Balance	200	$700
5-Jan	100	$375
19-Jan	500	$1,600
23-Jan	250	$900

Sales
Date	Quantity	Total Sale Price
3-Jan	50	$300
10-Jan	150	$825
25-Jan	300	$1,500
31-Jan	100	625

REQUIRED:

1. Assuming a periodic inventory system, determine cost of goods sold for January under the weighted average method. A physical count showed ending inventory of 300 units. (Round weighted averages to 2 decimal places)

2a. Assuming a perpetual inventory system, determine cost of goods sold for January under the weighted average method. (Round weighted averages to 2 decimal places)

b. Prepare the journal entries for all January purchase and sales. Assume sales and purchases are on account.

3. Why would a company choose to use weighted average inventory costing instead of FIFO or LIFO?

Answer 1

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