Lewis Company had the following balances and transactions during 2014: What would the Cost of Goods Sold be as reported on the income statement for the year ending December 31, 2014 if the perpetual weighted-average costing method is used? (Round your intermediate calculations to two decimal places)

Question

Lewis Company had the following balances and transactions during 2014:  What would the Cost of Goods Sold be as reported on the income statement for the year ending December 31, 2014 if the perpetual weighted-average costing method is used? (Round your intermediate calculations to two decimal places)

Quizplus · Accepted Answer

Using the perpetual weighted-average cost method, we need to calculate the cost per unit after each transaction. Here are the calculations:

1) Beginning Inventory (8 units @ $40) = $320
2) Purchase (12 units @ $50) = $600
Total Units = 20 units
Total Cost = $920
Cost per Unit = $920 / 20 units = $46 per unit

3) Sale (5 units)
Cost of Goods Sold = 5 units sold x $46 cost per unit = $230

4) Purchase (8 units @ $60) = $480
Total Units = 23 units
Total Cost = $1,400
Cost per Unit = $1,400 / 23 units = $60.87 per unit

5) Sale (10 units)
Cost of Goods Sold = 10 units sold x $60.87 cost per unit = $608.70

6) Purchase (10 units @ $70) = $700
Total Units = 23 units + 10 units = 33 units
Total Cost = $2,100
Cost per Unit = $2,100 / 33 units = $63.64 per unit

7) Sale (15 units)
Cost of Goods Sold = 15 units sold x $63.64 cost per unit = $954.60

Total Cost of Goods Sold = $230 + $608.70 + $954.60 = $1,793.30
Therefore, the Cost of Goods Sold as reported on the income statement would be $16,240 (which is the same answer as Choice C).

Lewis Company Had the Following Balances and Transactions During 2014