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Chapter 6: Q28PGA_2 (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

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

Cost of goods sold: $21,834

Ending Inventory: $990

Gross Profit: $13,566

Step by step solution

01

Step-by-Step Solution

Step 1: 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.

78

$55

$4,290

Jan 5.

156

$64

$9,984

78

156

$55

$64

$14,274

Jan 13

156

24

$64

$55

$11,304

54

$55

$2,970

Jan 18

114

$75

$8,550

54

114

$55

$75

$11,520

Jan 26

114

36

$75

$55

$10,530

18

$55

$990

Total

270

$18,534

330

$21,834

18

$55

$990

02

Computation of gross profit

TotalRevenue=Salevalueof13thJan+Salevalueof26thJan=180×$100+150×$116=$18,000+$17,400=$35,400

GrossProfit=Totalrevenue-Costofgoodssold=$35,400-$21,834=$13,566

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Most popular questions from this chapter

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-average inventory costing method.

Discuss the materiality concept. Is the dollar amount that is material the same for a company that has annual sales of \(10,000 compared with a company that has annual sales of \)1,000,000?

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

1. Determine the ending merchandise inventory and cost of goods sold amounts for the October financial statements using the FIFO, LIFO, and weighted-average inventory costing methods.

Question:Hot Bread Bakery reported Net sales revenue of \(44,000 and cost of goods sold of \)33,000. Compute Hot Bread’s correct gross profit if the company made either of thefollowing independent accounting errors. Show your work.

a. Ending merchandise inventory is overstated by $8,000.

Question:Assume that a Logan Burger restaurant has the following perpetual inventory record for hamburger patties:

Date PurchasesCost ofMerchandise

Goods SoldInventory on Hand

Jul. 9 \( 450 \) 450

22 \( 270 180

31 210 390

At July 31, the accountant for the restaurant determines that the current replacementcost of the ending merchandise inventory is \)435. Make any adjusting entry needed toapply the lower-of-cost-or-market rule. Merchandise inventory would be reported onthe balance sheet at what value on July 31?
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