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Chapter 6: 33PGB_3 (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

3. Prepare a perpetual inventory record, using the weighted-average inventory costingmethod, and determine the company’s cost of goods sold, ending merchandiseinventory, and gross profit. (Round weighted-average cost per unit to the nearestcent and all other amounts to the nearest dollar.)

Short Answer

Expert verified

Answer

Cost of goods sold: $24,840

Ending Inventory: $5,740

Gross Profit: $7,880

Step by step solution

01

Perpetual inventory table under the weighted average 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

220

$72

$15,730

Jan 5

140

$72

$10,080

80

$72

$5,760

Jan 16

170

$86

$14,620

250

$82

$20,380

Jan 27

180

$82

$14,760

70

$82

$5,740

Total

300

$24,500

320

$24,840

70

$82

$5,740

02

Computation of gross profit

TotalRevenue=Salevalueof5thJan+Salevalueof27thJan=(140×$100)+(180×$104)=$14,000+$18,720=$32,720GrossProfit=TotalRevenue-Costofgoodssold=$32,720-$24,840=$7,880

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Most popular questions from this chapter

Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

5. Which method results in a higher gross profit?

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month’s milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

2. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the LIFO inventory costing method

Futuristic Electronic Center began October with 65 units of merchandise inventory that cost \(82 each. During October, the store made the following purchases:

Oct. 3 25 units @ \) 90 each

12 30 units @ \( 90 each

18 35 units @ \) 96 each

Futuristic uses the periodic inventory system, and the physical count at October 31 indicates that 80 units of merchandise inventory are on hand.

Requirements

2. Net sales revenue for October totaled $28,000. Compute Futuristic’s gross profit for October using each method.

When does an inventory error cancel out, and why?
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