Orion Iron Corp tracks the number of units purchased and sol

Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period December 31 Unit Transactions Units Cost 350 $12 a. Inventory, Beginning For the year b. Purchase, April 11 C. Purchase, June 1 d. Sale, May 1 (sold for $40 per unit) e. Sale, July 3 (sold for $40 per unit) f. Operating expenses (excluding income tax expense), $18,300 10 16 800 850 350 640 Required 1. Calculate the number and cost of goods available for sale Number of Goods Available for Sale units Cost of Goods Available for Sale 2. Calculate the number of units in ending inventory Ending Invento units

Solution

1 Units Unit Cost Beginning Inventory 350 12 4200 Purchases 11-Apr 800 10 8000 01-Jun 850 16 13600 2000 25800 1 Number of goods available for sale 2000 Cost of goods available for sale 25800 2 Number of units in ending inventory Units available for sale 2000 Sales 01-May 350 03-Jul 640 Number of units in ending inventory 1010 3 Cost of ending inventory and cost of goods sold a Cost of sales FIFO LIFO Weighted Average 01-May 350*12 350*16 (350+640)*12.90 4200 5600 12771 03-Jul 640*10 (850-350)*16 (140*10) 6400 9400 10600 15000 b Cost of ending inventory (800-640)*10 = 1600 850*16 = 13600 (800-140)*10 = 6600 350*12 = 4200 1010*12.90 15200 10800 13029 Number of goods available for sale 2000 Cost of goods available for sale 25800 Weighted average rate 25800/2000 12.90 Cost of ending inventory cost of goods sold FIFO 15200 10600 LIFO 10800 15000 Weighted Average 13029 12771 4 Orion Iron Corp. Income Statement For the year ended December 31 FIFO LIFO Weighted Average Sales (350+640)*40 39600 39600 39600   Cost of goods Sold 10600 15000 12771 Gross margin 29000 24600 26829 Operating expenses 18300 18300 18300   Net income 10700 6300 8529