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Chapter 6: Q 20E-2 (page 363)

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

2. Compute cost of goods sold and gross profit using the LIFO inventory costing method.

Short Answer

Expert verified

Cost of goods sold: $2,290

Gross Profit: $350

Step by step solution

01

Step-by-Step-SolutionStep 1: Computation of cost of goods sold using LIFO

Date
Purchase/opening
Sales
Balance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount

May1

16

$65

$1,040

16

$65

$1,040

11

10

$78

$780

16

10

$65

$78

$1,820

23

10

2

$78

$65

$910

14

$65

$910

26

14

$80

$1,120

14

14

$65

$80

$2,030

29

14

4

$80

$65

$1,380

10

$65

$650

Total

40

$2,940

30

$2,290

10

$65

$650

02

Calculation of gross profit

NetRevenue=Salevalueof23rdMay+Salevalueof29thMay=12脳$88+18脳$88=30脳$88=$2,640

GrossProfit=NetRevenue-Costofgoodssold=$2,640-$2,290=$350

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Most popular questions from this chapter

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

6. If the business wanted to maximize gross profit, which method would it select?

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.

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

Question:New York Pool Supplies鈥檚 merchandise inventory data for the year ended December 31, 2019, follow:

Net Sales Revenue\( 58,000

Cost of Goods Sold:

Beginning Merchandise Inventory\) 4,900

Net Cost of Purchases 32,500

Cost of Goods Available for Sale37,400

Less: Ending Merchandise Inventory 4,700

Cost of Goods Sold32,700

Gross Profit \( 25,300

Requirements

1. Assume that the ending merchandise inventory was accidentally overstated by\)1,800. What are the correct amounts for cost of goods sold and gross profit?

Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:

Oct. 3 35 units @ \) 82 each

12 45 units @ \( 84 each

18 75 units @ \) 90 each

Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.

Requirements

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