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Chapter 6: 16E_1 (page 362)

Question:Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is \(119. Company records indicate the following for a particular line ofGolf Unlimited’s putters:

Date Item Quantity Unit Cost

Nov. 1 Balance 24 \) 53

6 Sale 20

8 Purchase 30 70

17 Sale 30

30 Sale 2

Requirements

1. Prepare a perpetual inventory record for the putters assuming Golf Unlimited usesthe FIFO inventory costing method. Then identify the cost of ending inventoryand cost of goods sold for the month.

Short Answer

Expert verified

Ending Inventory:$140

COGS:$3,232

Step by step solution

01

Step-by-Step-SolutionStep1: Perpetual Inventory Record using FIFO

DatePurchase/openingSalesBalance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Nov 1

24

$53

$1,272

24

$53

$1,272

6

20

$53

$1,060

4

$53

$212

8

30

$70

$2,100

4

30

$53

$70

$2,312

17

4

26

$53

$70

$2,032

4

$70

$280

30

2

$70

$140

2

$70

$140

Total

54

$3,372

52

$3,232

2

$70

$140

02

Ending inventory and COGS

Ending inventory in the perpetual system under the FIFO method is the value of ending inventory at the current cost and the COGS would be based on historic prices. This is so because of the implication of the first in first out method in the allocation of cost to the issued inventory.

In the given case, the ending inventory on 30th Nov amounts to $140 and the COGS for the period amounts to $3,232.

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Most popular questions from this chapter

Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of \(4,290. During the month, Fit Gym purchased and sold merchandise on account as follows:

Jan. 5 Purchase 156 crates @ \) 64 each

13 Sale 180 crates @ \( 100 each

18 Purchase 114 crates @ \) 75 each

26 Sale 150 crates @ $ 116 each

Requirements

1. Prepare a perpetual inventory record, using the FIFO inventory costing method, and determine the company’s cost of goods sold, ending merchandise inventory, and gross profit.

Question:Golf Unlimited carries an inventory of putters and other golf clubs. The sales price of each putter is \(119. Company records indicate the following for a particular line ofGolf Unlimited’s putters:

Date Item Quantity Unit Cost

Nov. 1 Balance 24 \) 53

6 Sale 20

8 Purchase 30 70

17 Sale 30

30 Sale 2

Requirements

2. Journalize Golf Unlimited’s inventory transactions using the weighted-averageinventory costing method. (Assume purchases and sales are made on account.)

What is the goal of conservatism?

Clarmont Resources, which uses the FIFO inventory costing method, has the following account balances at May 31, 2019, prior to releasing the financial statements for the year:

Merchandise Inventory, ending \( 13,500

Cost of Goods Sold 68,000

Net Sales Revenue 123,000

Clarmont has determined that the current replacement cost (current market value) of the May 31, 2019, ending merchandise inventory is \)12,400.

Requirements

2. What value would Clarmont report on the balance sheet at May 31, 2019, for merchandise inventory?

Question:New York Pool Supplies’s merchandise inventory data for the year ended December 31, 2019, follow:

Net Sales Revenue\( 58,000

Cost of Goods Sold:

Beginning Merchandise Inventory\) 4,900

Net Cost of Purchases 32,500

Cost of Goods Available for Sale37,400

Less: Ending Merchandise Inventory 4,700

Cost of Goods Sold32,700

Gross Profit $ 25,300

Requirements

2. How would the inventory error affect New York Pool Supplies’s cost of goodssold and gross profit for the year ended December 31, 2020, if the error is not correctedin 2019?
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