Chapter 6: Q 26E-1 (page 366)

Assume that Jump Coffee Shop completed the following periodicinventory transactions for a line of merchandise inventory:
Jun. 1 Beginning merchandise inventory 17 units @ $ 15 each
12 Purchase 5 units @ $ 19 each
20 Sale 14 units @ $ 37 each
24 Purchase 11 units @ $ 23 each
29 Sale 13 units @ $ 37 each
Requirements
1. Compute ending merchandise inventory, cost of goods sold, and gross profit using the FIFO inventory costing method.

Short Answer

Expert verified

Ending Inventory: $222

Cost of goods sold: $381

Gross Profit: $618

Step by step solution

Step-by-Step-SolutionStep 1: Computation of ending merchandise using FIFO

Using FIFO, the ending inventory would be valued at the current prices.

$E n d i n g I n v e n t o r y (U n i t s) = B e g i n n i n g I n v e n t o r y (u n i t s) + T o t a l P u r c h a s e s (U n i t s) - T o t a l S a l e s (u n i t s) = 17 + (5 + 11) - (14 + 13) = 17 + 16 - 27 = 6$

$E n d i n g I n v e n t o r y (V a l u e) = E n d i n g I n v e n t o r y (u n i t s) \times S a l e s p r i c e o f 29 t h J u n e = 6 \times $ 37 = $ 222$

Computation of cost of goods sold

$C o s t o f g o o d s s o l d = B e g i n n i n g I n v e n t o r y V a l u e + T o t a l P u r c h a s e V a l u e - E n d i n g I n v e n t o r y V a l u e = 17 \times $ 15 + (5 \times $ 19 + 11 \times $ 23) - $ 222 = $ 255 + $ 348 - $ 222 = $ 381$

Computation of gross profit

$N e t S a l e s R e v e n u e = S a l e v a l u e o f 20 t h J u n e + S a l e v a l u e n o f 29 t h J u n e = 14 \times $ 37 + 13 \times $ 37 = $ 518 + $ 481 = $ 999$

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Short Answer

Step by step solution

Step-by-Step-SolutionStep 1: Computation of ending merchandise using FIFO

Computation of cost of goods sold

Computation of gross profit

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