Question

Jensen Company started business on February 1st and applies the periodic inventory system. It had the following inventory transactions:

Purchases:

Date Received                    Quantity         Unit Cost        Amount

2/5                                         80                $6.00           $480

2/11                                       120                $8.00           $960   

2/18                                       140                $10.00         $1,400

Units sold:   240

Compute the dollar amount of ending inventory using the average cost method. Round the unit cost to two decimal places.

Answer 1

compute the weighted average cost per unit
purchases:
date received	quantity	unit cost	amount
05-Feb	80	6	480
11-Feb	120	8	960
18-Feb	140	10	1400
total units	340		2840
Weighted average cost per unit (2840/340 units)		8.35
Therefore,weighted average cost per unit is 8.35.
compute the cost of ending inventory under average cost method:
	units	amount
Total cost of goods available for sales	340	2840
less:cost of ending inventory	100	835
cost of goods sold	240	2004
working notes: compute the ending inventory cost under average method
Compute ending inventory cost under average method
method	calculation	amount
average method	100 units * 8.35	835