Thraya Industries had the following transactions in the month of March. Thraya uses a perpetual inventory system to account for its inventory transactions. All sales and purchases are on account. Date   Units Unit Cost Unit Sales Price Mar. 1 Beginning inventory 2,000 litres $6.15/l   Mar. 3 Purchase 2,500 litres $6.21/l   Mar. 5 Sale 2,300 litres   $10.50/l Mar. 10 Purchase 4,000 litres $6.72/l   Mar. 20 Purchase 2,500 litres $6.94/l   Mar. 30 Sale 5,200 litres   $12.50/l   Calculate the cost of goods sold, ending inventory, and gross profit for March using the weighted average (WA) method. Round the per-unit cost to two decimal places. Prepare journal entries to record the purchases and sales from parts B and C. Assume all purchases and sales are made on account. Answer the following questions for management. Which inventory method (FIFO or WA) produces the more meaningful inventory amount for the balance sheet? Why? Which inventory method (FIFO or WA) produces the more meaningful cost of goods sold amount for the income statement? Why? Which inventory method (specific identification, FIFO, or WA) is more likely to approximate the actual physical flow of goods? Why? Based on your calculations in A, B, and C, which method produced the highest profit?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Thraya Industries had the following transactions in the month of March. Thraya uses a perpetual inventory system to account for its inventory transactions. All sales and purchases are on account.

Date

 

Units

Unit Cost

Unit Sales Price

Mar. 1

Beginning inventory

2,000 litres

$6.15/l

 

Mar. 3

Purchase

2,500 litres

$6.21/l

 

Mar. 5

Sale

2,300 litres

 

$10.50/l

Mar. 10

Purchase

4,000 litres

$6.72/l

 

Mar. 20

Purchase

2,500 litres

$6.94/l

 

Mar. 30

Sale

5,200 litres

 

$12.50/l

 

  1. Calculate the cost of goods sold, ending inventory, and gross profit for March using the weighted average (WA) method. Round the per-unit cost to two decimal places.
  2. Prepare journal entries to record the purchases and sales from parts B and C. Assume all purchases and sales are made on account.
  3. Answer the following questions for management.
    1. Which inventory method (FIFO or WA) produces the more meaningful inventory amount for the balance sheet? Why?
    2. Which inventory method (FIFO or WA) produces the more meaningful cost of goods sold amount for the income statement? Why?
    3. Which inventory method (specific identification, FIFO, or WA) is more likely to approximate the actual physical flow of goods? Why?
    4. Based on your calculations in A, B, and C, which method produced the highest profit?
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
steps

Unlock instant AI solutions

Tap the button
to generate a solution

Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education