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Chapter 6: Q33PGB_1 (page 369)

Exercise World began January with merchandise inventory of 90 crates of vitamins that cost a total of \(5,850. During the month, Exercise World purchased and soldmerchandise on account as follows:

Jan. 2 Purchase 130 crates @ \) 76 each

5 Sale 140 crates @ \( 100 each

16 Purchase 170 crates @ \) 86 each

27 Sale 180 crates @ $ 104 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: $24,330

Ending Inventory: $6,020

Gross Profit: $8,390

Step by step solution

01

Perpetual inventory table under the FIFO method

02

Computation of gross profit

TotalRevenue=SaleValueof5thJan+SaleValueof27thJan=(140×$100)+(180×$104)=$14,000+$18,720=$32,720GrossProfit=TotalRevenue‐Costofgoodssold=$32,720‐$24,330=$8,390

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Most popular questions from this chapter

How is days’ sales in inventory calculated, and what does it measure?

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

3. Prepare a perpetual inventory record, using the weighted-average inventory costing method, and determine the company’s cost of goods sold, ending merchandise inventory, and gross profit. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

1. Compute cost of goods sold and gross profit using the FIFO inventory costing method.

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

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

5. Compute gross profit for August using FIFO, LIFO, and weighted-average inventory costing methods.
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