Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 6: Q2TI-c (page 338)

Serenity Books has the following transactions in August related to merchandise inventory.

Aug. 1 Beginning merchandise inventory, 10 books @ \(15 each

3 Sold 3 books @ \)20 each

12 Purchased 8 books @ \(18 each

15 Sold 9 books @ \)20 each

20 Purchased 4 books @ \(20 each

28 Sold 5 books @ \)25 each

c. Determine the cost of goods sold and ending merchandise inventory by preparing a perpetual inventory record using the LIFO inventory costing method.

Short Answer

Expert verified

Cost of goods sold: $329

Ending Inventory: $75

Step by step solution

01

LIFO inventory costing under perpetual record

LIFO costing is a cost flow assumption of the last-in-first-out order for the issued inventory. Perpetual record is the method of updating inventory accounts continuously for each event. So LIFO inventory under perpetual record is the method of applying LIFO assumption for continuous updating of inventory records.

02

Computation of COGS and Ending Inventory under LIFO

Date
Purchase/opening
Sales
Balance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount











Aug1

10

$15

$150

10

$15

$150

3

3

$15

$75

7

$15

$105

12

8

$18

$144

7

8

$15

$18

$249

15

8

1

$18

$15

$159

6

$15

$90

20

4

$20

$80

6

4

$15

$20

$170

28

4

1

$20

$15

$95

5

$15

$75

Total

22

$374

17

$329

5

$75

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

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

3. Which method will result in the lowest income taxes for Futuristic? Why? Which method will result in the highest net income for Futuristic? Why?

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.

b. Ending merchandise inventory is understated by $8,000.

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.

Accounting for inventory using the perpetual inventory system—

FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO, and weighted-average 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

4. Determine the company’s cost of goods sold for August using FIFO, LIFO, and weighted-average inventory costing methods.

Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Jan. 3 Sale 45 \) 83

8 Purchase 75 $ 52

21 Sale 70 85

30 Purchase 10 55

Requirements

3. Prepare a perpetual inventory record for the merchandise inventory using theweighted-average inventory costing method.
See all solutions

Recommended explanations on Business Studies Textbooks

Influences On Business

Read Explanation

Business Case Studies

Read Explanation

Change Management

Read Explanation

Organizational Communication

Read Explanation

Financial Performance

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free