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Chapter 6: 33PGB_2 (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

2. Prepare a perpetual inventory record, using the LIFO 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: $25,800

Ending Inventory:$4,550

Gross Profit: $6,920

Step by step solution

01

Perpetual inventory table under the LIFO 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

130

10

$76

$65

$10,530

80

$65

$5,200

Jan 16

170

$86

$14,620

80

170

$65

$86

$19,820

Jan 27

170

10

$86

$65

$15,270

70

$65

$4,550

Total

300

$24,500

320

$25,800

70

$65

$4,550

02

Computation of gross profit

TotalRevenue=Salevalueof5thJan+Salevalueof27thJan=(140×$100)+(180×$104)=$14,000+$18,720=$32,720GrossProfit=TotalRevenue-Costofgoodssold=$32,720-$25,800=$6,920

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Most popular questions from this chapter

What is the goal of conservatism?

What account is debited when recording the adjusting entry to write down merchandise inventory under the LCM rule?

Nutriset Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended March 31, 2019, Nutriset’s preliminary income statement, before the year-end adjustments, appears as follows:

NUTRISET FOODS

Income Statement (Partial)

Year Ended March 31, 2019

Net Sales Revenue \( 118,000

Cost of Goods Sold 47,000

Gross Profit \) 71,000

Nutriset has determined that the current replacement cost of ending merchandise inventory is \(19,500. Cost is \)24,000.

Requirements

2. Prepare a revised partial income statement to show how Nutriset Foods should report sales, cost of goods sold, and gross profit.

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?

Question:Ward Hardware does not expect costs to change dramatically and wants to use an inventory costing method that averages cost changes.

Requirements

1. Which inventory costing method would best meet Ward’s goal?

2. Assume Ward wanted to expense out the newer purchases of goods instead.

Which inventory costing method would best meet that need?
See all solutions

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