Question

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-average inventory costing method.

Short answer

The ending inventory at average cost comes out to be $1,400.

Step-by-step solution

Step-by-Step SolutionStep 1: Weighted average costing method

The weighted average costing method is the mid-way between the FIFO method and the LIFO method. In the weighted average method, the average cost is computed after every purchase, and the goods are sold on the immediate average cost. The average cost is the mean value of FIFO cost and LIFO cost.

Perpetual inventory table under the weighted average method

	Purchases			Cost of goods sold			Inventory on hand
Date	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit Cost	Total Cost
Aug 1							50	$35	$1,750
Aug 3				45	$35	$1,575	5	$35	$175
Aug 8	90	$54	$4,860				95	$53	$5,035
Aug 21				85	$53	$4,505	10	$53	$530
Jan 26	15	$58	$870				25	$56	$1,400
Total	105		$5,730	130		$6,080	25	$56	$1,400