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Chapter 6: 33PGB_1 (page 369)

Exercise World began January with merchandise inventory of 90 crates of vitamins that cost a total of \(5,850. During the month, Exercise World purchased and soldmerchandise on account as follows:

Jan. 2 Purchase 130 crates @ \) 76 each

5 Sale 140 crates @ \( 100 each

16 Purchase 170 crates @ \) 86 each

27 Sale 180 crates @ $ 104 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.

Short Answer

Expert verified

Answer

Cost of goods sold: $24,330

Ending Inventory: $6,020

Gross Profit: $8,390

Step by step solution

01

Perpetual inventory table under the FIFO 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

Jan 1

90

$65

$5,850

Jan 2

130

$76

$9,880

90

130

$65

$76

$15,730

Jan 5

90

50

$65

$76

$ 9,650

80

$76

$6,080

Jan 16

170

$86

$14,620

80

170

$76

$86

$20,700

Jan 27

80

100

$76

$86

$14,680

70

$86

$6,020

Total

300

$24,500

320

$24,330

70

$86

$6,020

02

Computation of gross profit

TotalRevenue=Salevalueof5thJan+Salevalueof27thJan=(140×$100)+(180×$104)=$14,000+$18,720=$32,720GrossProfit=TotalRevenue-Costofgoodssold=$32,720-$24,330=$8,390

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Most popular questions from this chapter

What is the goal of conservatism?

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

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2. Journalize Golf Unlimiteds inventory transactions using the LIFO inventory costingmethod. (Assume purchases and sales are made on account.)

Some of L and K Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is\(32,000 below the business’s cost of the goods, which was \)98,000. Before any adjustmentsat the end of the period, the company’s Cost of Goods Sold account has a balanceof $410,000.

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4. Which accounting principle or concept is most relevant to this situation?

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

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Cost of Goods Available for Sale37,400

Less: Ending Merchandise Inventory 4,700

Cost of Goods Sold32,700

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Requirements

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Question:Hot Bread Bakery reported Net sales revenue of \(44,000 and cost of goods sold of \)33,000. Compute Hot Bread’s correct gross profit if the company made either of thefollowing independent accounting errors. Show your work.

a. Ending merchandise inventory is overstated by $8,000.
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