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Chapter 6: 19E_2 (page 363)

Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

2. Compute the cost of goods sold, cost of ending merchandise inventory, and grossprofit using the LIFO inventory costing method.

Short Answer

Expert verified

Cost of goods sold:$372

Ending Inventory:$73

Gross Profit:$112

Step by step solution

01

Step-by-Step-SolutionStep1: Perpetual Inventory Record using FIFO

Date

Purchase/opening

Sales

Balance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Dec 1

13

$9

$117

13

$9

$117

8

8

$22

$176

5

$9

$45

14

16

$14

$224

5

16

$9

$14

$269

21

14

$14

$196

5

2

$9

$14

$73

Total

29

$341

22

$372

7

$9

$14

$73

02

Computation of gross profit

GrossProfit=Netrevenue-Costofgoodssold=22脳$22-$372=$484-$372=$112

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Most popular questions from this chapter

During periods of rising costs, which inventory costing method produces the highest gross profit?

Question:Ward Hardware does not expect costs to change dramatically and wants to use an inventory costing method that averages cost changes.

Requirements

1. Which inventory costing method would best meet Ward鈥檚 goal?

2. Assume Ward wanted to expense out the newer purchases of goods instead.

Which inventory costing method would best meet that need?

Question:This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and continued through Chapter 5.

Consider the December transactions for Crystal Clear Cleaning that were presentedin Chapter 5. (Cost data have been removed from the sale transactions.) Crystal Clearuses the perpetual inventory system.

Dec. 2 Purchased 1,000 units of inventory for \(4,000 on account from Sparkle

Company on terms, 5/10, n/20.

5 Purchased 1,200 units of inventory from Borax on account with terms

4/10, n/30. The total invoice was for \)6,000, which included a \(300

freight charge.

7 Returned 300 units of inventory to Sparkle from the December 2

purchase.

9 Paid Borax.

11 Sold 500 units of goods to Happy Maids for \)5,500 on account with

termsn/30.

12 Paid Sparkle.

15 Received 100 units with a sales price of \(1,100 of goods back from

customer Happy Maids.

21 Received payment from Happy Maids, settling the amount due in full.

28 Sold 500 units of goods to Bridget, Inc. on account for \)6,500. Terms

1/15,n/30.

29 Paid cash for utilities of \(550.

30 Paid cash for Sales Commission Expense of \)214.

31 Received payment from Bridget, Inc., less discount.

31 Recorded the following adjusting entries:

a. Physical count of inventory on December 31 showed 800 units of

goods on hand.

b. Depreciation, \(150.

c. Accrued salaries expense of \)2,100.

d. Estimated sales returns of \(1,500, with cost of \)540.

e. Prepared all other adjustments necessary for December (Hint: You willneed to review the adjustment information in Chapter 3 to determinethe remaining adjustments). Assume the cleaning supplies left atDecember 31 are $50.

Requirements

2. Journalize the transactions for December 11th, 28th, and 31st (adjusting entry aonly) using the perpetual inventory record created in Requirement 1.

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

Requirements

1. Journalize any required entries.

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

2. Net sales revenue for October totaled $28,000. Compute Futuristic鈥檚 gross profit for October using each method.
See all solutions

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