Question

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.
Transactions Units Unit Cost
Beginning inventory, January 1 3,200 $ 55
Transactions during the year:
a. Purchase, January 30 4,100 69
b. Sale, March 14 ($100 each) (2,850 )
c. Purchase, May 1 2,800 85
d. Sale, August 31 ($100 each) (3,300 )


Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Answer 1

Answer:

From the data provided in the question, it appears that the cost of goods sold under specific identification method is required.

Cost of goods sold for March 14 sales                                   $ 180,690

Cost of goods sold for August 31 sales                                 $  218,700

Explanation:

Computation of Cost of goods sold under specific identification method

Sale of March 14                                                                           2,850 units

2/5 from beginning inventory ( 2,850 *2/5 %) * $ 55                  $ 62,700

3/5 from purchase of January 30 (2,850*3/5) * $ 69                  $ 117,990

Total cost of goods sold for March 14 sales                              $ 180,690

Sale of August 31                                                                            3,300 units

From beginning inventory (3,200 - (2,850*2/5)                            2,060 units

From purchase of May 1                                                                  1,240 units                                  

2,060 units* $ 55                                                                           $ 113,300

 1,240 units * $ 85                                                                          $  105,400

Total cost of goods sold for August 31 sales                                $ 218,700