Trans Co. uses the periodic inventory system. The following are inventory transactions for the month of January:
|Jan. 1||Beginning inventory||10, 000 units @ $3|
|5||Purchase||8, 000 units @ $4|
|15||Purchase||5, 000 units @ $6|
|20||Sales at $10 per unit||14, 000 units|
Trans uses the average cost method to determine the value of its inventory.
What amount should Trans report as the cost of ending inventory on its Balance Sheet for the month of January?
Periodic Inventory System:
Under the periodic inventory system, businesses rely on physical verification for the valuation of ending inventory. The count of inventory at physical verification is then used for the valuation of ending inventory. The value of ending inventory is then used to compute the cost of goods sold.
Answer and Explanation: 1
Computation of weighted-average cost of inventory
|Number of Units||Per Unit||Amount|
|Units purchased on Jan...|
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fromChapter 1 / Lesson 14
Explore the periodic inventory system. Learn the definition of the periodic inventory system and understand its advantages. See periodic inventory system examples.