Millibrand Co uses a periodic inventory system with the specific identification method of cost assignment.
Date Units Unit cost
$
Beginning inventory July 1 1000 9
Purchase 12 2000 11
Purchase 26 1000 12
On 27 July 500 units from beginning inventory and 1000 units from the 12 July purchase were sold. What was the value of ending inventory at 31 July?

Question

Quizplus · Accepted Answer

To calculate the ending inventory, we need to first determine the cost of goods sold for the units sold on July 27.

500 units were sold from the beginning inventory at a cost of $9 per unit, so the cost of goods sold for these units is 500 x $9 = $4500.

For the 1000 units sold from the July 12 purchase, we need to use the specific identification method. The cost per unit for this purchase was $11, so the cost of goods sold for these units is 1000 x $11 = $11,000.

Therefore, the total cost of goods sold for the units sold on July 27 is $15,500.

To calculate the value of ending inventory, we can add up the cost of the remaining units. There are 1000 units from the July 12 purchase and 1000 units from the July 26 purchase remaining. The cost per unit for the July 12 purchase was $11, and the cost per unit for the July 26 purchase was $12.

Using the specific identification method, we can see that the cost of the 1000 units remaining from the July 12 purchase is $11,000. For the 1000 units remaining from the July 26 purchase, we can assume that the cost per unit is also $12, since there are no units remaining from the beginning inventory at a lower cost.

Therefore, the total cost of the remaining units is $11,000 + (1000 x $12) = $23,000.

Thus, the value of ending inventory at 31 July is $23,000 (Option B)

Millibrand Co Uses a Periodic Inventory System with the Specific