Williams Company had the following balances and transactions during 2013. What would the company's inventory amount be on the December 31, 2013 balance sheet if the perpetual average-costing method is used? (Answers are rounded to the nearest dollar.)

Question

Williams Company had the following balances and transactions during 2013.  What would the company's inventory amount be on the December 31, 2013 balance sheet if the perpetual average-costing method is used? (Answers are rounded to the nearest dollar.)

Quizplus · Accepted Answer

The perpetual average-costing method recalculates the average cost of inventory after each purchase, so we need to calculate the weighted average cost per unit for all purchases made in 2013:

(4 x $200) + (6 x $100) + (5 x $50) = $1,900 
15 units

The weighted average cost per unit is $126.67.

To find the ending inventory amount, we need to multiply the number of units on hand by the average cost per unit:

(8 units x $126.67 per unit = $1,013.36

Rounding to the nearest dollar, the answer is $1,150 (choice B).

Williams Company Had the Following Balances and Transactions During 2013