Glanville Distribution markets CDs of the performing artist Harrilyn Clooney. At the beginning of March, Glanville had in beginning inventory 1,500 Clooney CDs with a unit cost of $7. During March Glanville made the following purchases of Clooney CDs.
March 5 3,000 @ $8 March 21 4,000 @ $10
March 13 5,500 @ $9 March 26 2,000 @ $11
During March 12,500 units were sold. Glanville uses a periodic inventory system.
To determine the cost of goods sold and the ending inventory using the periodic inventory system, we need to calculate the cost of goods available for sale first.
To do this, we add the beginning inventory to the purchases made during the month:
Beginning Inventory: 1,500 CDs @ $7 = $10,500
March 5th Purchase: 3,000 CDs @ $8 = $24,000
March 13th Purchase: 5,500 CDs @ $9 = $49,500
March 21st Purchase: 4,000 CDs @ $10 = $40,000
March 26th Purchase: 2,000 CDs @ $11 = $22,000
Cost of Goods Available for Sale = $10,500 + $24,000 + $49,500 + $40,000 + $22,000 = $146,000
Next, we calculate the cost of goods sold by subtracting the ending inventory from the cost of goods available for sale:
Cost of Goods Sold = Cost of Goods Available for Sale - Ending Inventory
Since we are given the number of units sold (12,500 units) but not the ending inventory, we need to calculate the ending inventory. To do this, we subtract the units sold from the sum of the beginning inventory and purchases:
Units Available for Sale = Beginning Inventory + Purchases
Units Available for Sale = 1,500 + 3,000 + 5,500 + 4,000 + 2,000 = 16,000 units
Ending Inventory = Units Available for Sale - Units Sold
Ending Inventory = 16,000 - 12,500 = 3,500 units
Now, to calculate the cost of the ending inventory, we multiply the number of units by their respective unit costs:
Ending Inventory = 3,500 CDs x $11 = $38,500
Finally, we can calculate the cost of goods sold:
Cost of Goods Sold = Cost of Goods Available for Sale - Ending Inventory
Cost of Goods Sold = $146,000 - $38,500 = $107,500
Therefore, the cost of goods sold during March using the periodic inventory system is $107,500. The ending inventory is valued at $38,500.