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Chapter 6: Q28PGA_1 (page 367)

Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of \(4,290. During the month, Fit Gym purchased and sold merchandise on account as follows:

Jan. 5 Purchase 156 crates @ \) 64 each

13 Sale 180 crates @ \( 100 each

18 Purchase 114 crates @ \) 75 each

26 Sale 150 crates @ $ 116 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

Cost of goods sold: $21,471

Ending Inventory: $1,350

Gross Profit: $13,929

Step by step solution

01

Step-by-Step Solution

Step 1: 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.

78

$55

$4,290

Jan 5.

156

$64

$9,984

78

156

$55

$64

$14,274

Jan 13

78

102

$55

$64

$10,815

54

$64

$3,456

Jan 18

114

$75

$8,550

54

114

$64

$75

$12,006

Jan 26

54

96

$64

$75

$10,656

18

$75

$1,350

Total

270

$18,534

330

$21,471

18

$75

$1,350

02

Computation of gross profit

TotalRevenue=Salevalueof13thJanuary+Salevalueof26thJanuary=180×$100+150×$116=$18,000+$17,400=$35,400

GrossProfit=TotalRevenue-Costofgoodssold=$35,400-$21,471=$13,929

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Most popular questions from this chapter

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

3. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the weighted-average inventory costing method. Round allamounts to the nearest cent.

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries— Weighted-average

Requirements

1. Prepare Boston Cycle’s perpetual inventory record assuming the company uses theweighted-average inventory costing method.

Some of M and C Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is \(24,000 below the business’s cost of the goods, which was \)97,000. Before any adjustments at the end of the period, the company’s Cost of Goods Sold account has a balance of $380,000.

Requirements

2. At what amount should the company report merchandise inventory on the balance sheet?

What is the effect on the cost of goods sold, gross profit, and net income if ending merchandise inventory is understated?

What does the lower-of-cost-or-market (LCM) rule require?
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