CC7-1 Accounting for Changing Inventory Costs [LO7-3, LO7-5]

In October, Nicole of Nicoles Getaway Spa (NGS) eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product line, Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory. On December 31, NGS purchased 10 units at a total cost of $8.50 per unit. NGS purchased 30 more units at $10.50 in February, but returned 5 defective units to the supplier. In March, NGS purchased 15 units at $12.50 per unit. In May, 50 units were purchased at $12.50 per unit; however, NGS took advantage of a 3.00/10, n/30 discount from the supplier. In June, NGS sold 50 units at a selling price of $11.40 per unit and 35 units at $9.40 per unit.

Required: 1. State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed. Immediately expensed O Inventory cost 2. Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first-in, first-out (FIFO) method. (Do not round intermediate calculations. Round final answers to the nearest dollar amount.) Cost of goods available for sale Cost of goods sold Cost of ending inventory