 Hello, in this lecture, we're going to continue to do some shorter test type problems, problems that could be fit into multiple choice formats. So we have a company here uses a weighted average perpetual inventory system and reports the following. So we've got some purchases and sales and they give us the units and the sale and the purchase price. What is the per unit value of ending inventory at August 31st? Okay, so anytime we do these, whether it be average FIFO or LIFO, I would generally use at least six basically rows and let me show you kind of why that would be. I would have the sales rows here that we would have lined out. I'm just going to highlight those just so we can see them. And then I'm going to have three more and this is going to be related to basically the purchases and the ending inventory. So if we start off here, we've got a purchase. So we have a purchase that happens and I'm not going to put the date in right now, but I'm going to put that in my last three sales because we're going to have three pieces of information. We've got the units, we've got the cost per unit and then we've got the total. So we've got the units of nine, we've got the cost per unit of $11 and if we multiply that out then our ending inventory that would be on the balance sheet is nine times 11 and that's where we are at at this point. We don't need to average anything. The per unit cost is $11 at this point. Then we purchased another 11 units, so we're just going to purchase again. We're going to go over these columns over here and we purchased another 11 units at tab $15 tab. I'm going to multiply that out. So now we've got 11 times the $15. So now we have this issue where we're going to have a problem if we sell the units because we have some that cost 11, some that cost 15. We're not going to use the LIFO or the FIFO. We're going to average them. So we could do that now. How are we going to average this items? How are we going to average this? Well, we can add these up. We can say the sum of the total units are 9 and 11 and that would say we have 20 units. And then I'm going to skip over here. I'm not going to sum these up. That wouldn't make any sense because these are unit prices to add them up. It's not like the one unit price would be the sum of those. So we're going to sum up the totals though, the total that we have on the balance sheet here. And then we can take the average. We can say, hey, this is the numerical value we have in the balance sheet. Some of them cost 11. Some of them cost 15, but we're just going to come up with an average number. So the average then would be equal to the cost of 264 divided by the units, 20. And that would give an average of 1320. So we bought them for 11, 15. We're averaging 1320. Then we have a sale that happens. We have a sale and of course, this is the only row we really care about at this point. This is the only row that is of relevance at this point going down. And I'm going to say the sale is over here. I'm going to, that's why I have these other three rows because there could be two pieces of information depending on what type of question they ask. So it's good to just always kind of put these out, at least in these types of rows. And the sales is going to be, in this case, 18 units. And then the cost, if they want to give us, they didn't ask for the cost of sales, but they could. That's why it's good to break them out. And the cost is going to be this 1320, 1320. So it's not the 11, it's not the 15, it's the 1320. I don't know why I can't put that in there. And then if we multiply that out, then the cost of sales is this times this. Now we don't have the sales price. They didn't even give us that. If we did, we'd need three more columns here, given us the sales side of it. But we're only dealing with the cost side of it. That's why we're just using these six columns. And now we're going to see what's left there. Well, we had 20, and we just sold 18. Therefore, we've got 20 minus 18 left for force two. And we know that they all cost 13.2, because that's the average. And so we're going to say, what's left on the balance sheet? Two times 13.2. OK, so then we got one more, so this is what's on the balance sheet at this point in time, then we got one more purchase that happens. So we purchase, and we don't need anything in these columns. We're going to go over here. Now it went up because to 14, it's kind of inflation. This is like the normal, I'm sorry, the units were 14, but the cost was also going up to 14. And that's kind of like inflation. You would think the costs per unit would go up, but they don't have to. They could go down at some points for some different reasons. But all else equal kind of you would think costs would go up over time. But in any case, we multiply that out. We're going to say now we got 14 units times the $14 per unit. And that now cost us the 196. So this is where we were at last time. And now we have what we have here that we just purchased. So we can then take those and find the average again. So the average would then be the sum of the two that we had before plus the 14 that we just purchased. And that would be 16. And then we're going to add the totals, not the unit amounts. We're going to add the totals. And we're going to say, all right, we had $20 to $40 on the balance sheet. And then 196 that we purchased, that's $122.40. If we take the average, then the average cost would be the $222.40 on the balance sheet, the total cost divided by the number of units being 16 at this point. Average cost being this $13.90, $13.90. Next one says a company's inventory record reports the following. And then we have the beginning balance and two purchases. And then on August 15th, sold 64 units using the FIFO Perpetual Inventory Method. What is the value of ending of the inventory at August 15th? So if you know the FIFO and you can see these fairly well, you can basically see that the FIFO, if we're talking about the inventory, we're talking about what is left at the end, that's going to be the amount that it's going to be left here. So we could basically sum these up and see counting backwards how much would still be left after the sales amount. But I'm going to set this up in a similar way that we're kind of working no matter what they ask. And so this would be a little bit longer of a process, but it will work basically for most of the different types of problems. So once again, I'm going to have like six columns here, one, three, four, five, six, one for the cost of the sales and one for the purchases. And then anything over here. So we have the beginning balance, beginning balance. I'm going to put that over here. So we have two pieces of information, 32 units at $22 means that we're starting off with 32 times 22 for a dollar amount of 704. And then we had a purchase that happened. So of course the purchase was 27 at 21. And so that means that we have 27 times 21. And that gives us the 567. So the total at this time, we have basically two layers and that is the 704 and the 567. And then we had another purchase and that's going to be at $31 and I mean 31 units at $22. And if we multiply that out, 31 units times $22 and that gives us the 682. Now if we think about the units that were sold, there were 64 units sold. So remember what we're going to eat up these, then eat up these and then these. That's the three layers that we're going to eat up. And because it's first in, first out, we're going to take the oldest ones first. So I'm going to put the purchase down here or the sale here. And I'm just going to take it layer by layer. So if we sold 64 units, that's greater than 32, therefore the 32 is gone. We're selling all those at the $22. So if they asked us for the cost of goods sold, which they didn't, they asked us for the ending inventory, but the cost of goods sold would include that 32 times the 22 here. And then we got the 32 and the 27. That adds up to 59, which is still less than the 64. So we're going to take all that 27 that's going to be gone at 21 units and if we multiply those out, then the cost of the goods sold would include this amount. And now we need to get 64 units. So we're going to take whatever else we need to to get up to that 64 from this layer now, the 31 layer. So I'm going to do it this way. I'm going to say 64 minus the 32 minus the 27 is what we're going to need to make this plus this plus this equal the 64 units, which we are selling. So of these 31, then we're going to sell five of those and those cost 22 units. And if we multiply that out, then we have five times 22. And there we have this. Now, now we're going to basically see what our layers are. And of course, this layer is wiped out. This layer is wiped out. We're only left with part of this 31, this 31 minus these five units. That's what we're left with. Those cost $22. Therefore, what we have left in Indian inventory is the 26 times the 22. So that's what we have left. That's the Indian inventory. They could have asked us for the cost of goods sold of this. And notice what that would be is the sum of these $1,381. Next one says company reported the falling income statement informations. We have sales. We've got the cost of goods sold and we have gross profit calculations. It then says that the beginning inventory is correct. However, the Indian inventory figure was overstated by 24,000. Given this information, the correct gross profit would be what? So we could just basically recalculate this. I'm going to just say sales is $141,000. We know the cost of goods sold calculation is going to include the beginning inventory, say beginning inventory, $138,000 plus the purchases. So I'm just pulling these numbers down and they're telling us that these numbers were correct. Make this a bit larger so we can see that. So the purchases then is just this number, $277,000, therefore the cost available, this plus this. I'm going to go ahead and underline this number, home tab, fonts, underline. So all we did was take the $138,000 plus the $277,000 to get what is available. And then we have the ending inventory. So the ending inventory and this is where the problem happened. They're saying that this number is too high. So therefore we got to reduce that number by the $24,000. So I'm just going to take this number, ending inventory, $148,000 minus $24,000 to get the correct number after accounting for the overstatement. And that'll give us this $124,000. Then we can have the correct cost of goods sold, which I'm going to put over here in this column for my purposes so we can pull that cost goods sold out and then have the gross profit in the outer column. So I'm going to scroll down since we don't need that information anymore. And we're going to say this equals the cost of goods available minus what's in ending inventory. That is now the cost of goods sold, the new adjusted cost goods sold. Gross profit is then calculated as the $144,000 minus the $291,000 given the revised gross profit of $123,000.