Chapter 6: Q 26E-2 (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
2. Compute ending merchandise inventory, cost of goods sold, and gross profit using the LIFO inventory costing method.

Short Answer

Expert verified

Ending Inventory: $90

Cost of goods sold: $513

Gross Profit: $486

Step by step solution

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

Using LIFO, the ending inventory would be valued at historical prices.

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

$\begin{array}{rcl} 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 B e g i n n i n g I n v e n t o r y P r i c e \\ = & 6 \times $ 15 \\ = & $ 90 \end{array}$

Computation of cost of goods sold

$\begin{array}{rcl} 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) - $ 90 \\ = & $ 255 + $ 348 - $ 90 \\ = & $ 513 \end{array}$

Computation of gross profit

$\begin{array}{rcl} 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 \end{array}$

$\begin{array}{rcl} G r o s s P r o f i t & = & T o t a l S a l e v a l u e - C o s t o f g o o d s s o l d \\ = & $ 999 - $ 513 \\ = & $ 486 \end{array}$

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	2019	2018	2017
Net Sales Revenue	\( 220,000	\) 162,000	\( 176,000
Cost of Goods Sold:
Beginning Merchandise Inventory	\)22,000	\(29,000	\)46,000
Net cost of purchase	132,000	90,000	76,000
Cost of goods available for sale	154,000	119,000	122,000
Less: Ending Merchandise Inventory	32,000	22,000	29,000
Cost of goods sold	122,000	97,000	93,000
Gross Profit	98,000	65,000	83,000
Operating Expenses	72,000	38,000	48,000
Net Income	\( 26,000	\) 27,000	$ 35,000

Short Answer

Step by step solution

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

Computation of cost of goods sold

Computation of gross profit

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