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Chapter 6: 33PGB_2 (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

2. Prepare a perpetual inventory record, using the LIFO inventory costing method,and determine the company鈥檚 cost of goods sold, ending merchandise inventory,and gross profit.

Short Answer

Expert verified

Answer

Cost of goods sold: $25,800

Ending Inventory:$4,550

Gross Profit: $6,920

Step by step solution

01

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

90

$65

$5,850

Jan 2

130

$76

$9,880

90

130

$65

$76

$15,730

Jan 5

130

10

$76

$65

$10,530

80

$65

$5,200

Jan 16

170

$86

$14,620

80

170

$65

$86

$19,820

Jan 27

170

10

$86

$65

$15,270

70

$65

$4,550

Total

300

$24,500

320

$25,800

70

$65

$4,550

02

Computation of gross profit

TotalRevenue=Salevalueof5thJan+Salevalueof27thJan=(140脳$100)+(180脳$104)=$14,000+$18,720=$32,720GrossProfit=TotalRevenue-Costofgoodssold=$32,720-$25,800=$6,920

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Most popular questions from this chapter

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

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鈥擣IFO

Requirements

1. Prepare Boston Cycle鈥檚 perpetual inventory record assuming the company uses theFIFO inventory costing method.

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month鈥檚 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.

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.

Question:Hot Bread Bakery reported Net sales revenue of \(44,000 and cost of goods sold of \)33,000. Compute Hot Bread鈥檚 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.
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