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Chapter 6: Q 20E-3 (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

3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

Short Answer

Expert verified

Cost of goods sold: $2,190

Gross Profit: $450

Step by step solution

01

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

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

26

$70

$1,820

23

12

$70

$840

14

$70

$980

26

14

$80

$1,120

28

$75

$2,100

29

18

$75

$1,350

10

$75

$750

Total

40

$2,940

30

$2,190

10

$75

$750

02

Calculation of gross profit

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

GrossProfit=NetRevenue-Costofgoodssold=$2,640-$2,190=$450

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Most popular questions from this chapter

When using the periodic inventory system, which inventory costing method(s) always produces the same result as when using the perpetual inventory system?

Under a perpetual inventory system, what are the four inventory costing methods, and how does each method determine ending merchandise inventory and cost of goods sold?

Question:This problem continues the Canyon Canoe Company situation from Chapter 5. At the beginning of the January 2019, Canyon Canoe Company decided to carry and sellT-shirts with its logo printed on them. Canyon Canoe Company uses the perpetualinventory system to account for the inventory. During February 2019, Canyon CanoeCompany completed the following merchandising transactions:

Feb. 2 Sold 60 T-shirts at \(10 each.

5 Purchased 50 T-shirts at \)6 each.

7 Sold 45 T-shirts for \(10 each.

8 Sold 20 T-shirts for \)10 each.

10 Canyon Canoe Company realized the inventory was running

low, so it placed a rush order and purchased 20 T-shirts. The

premium cost for these shirts was \(7 each.

12 Placed a second rush order and purchased 40 T-shirts at \)7

each.

13 Sold 20 T-shirts for \(10 each.

15 Purchased 50 T-shirts for \)6 each.

20 In order to avoid future rush orders, purchased 150 T-shirts.

Due to the volume of the order, Canyon Canoe Company

was able to negotiate a cost of \(5 each.

21 Sold 40 T-shirts for \)10 each.

22 Sold 35 T-shirts for \(10 each.

24 Sold 20 T-shirts for \)10 each.

25 Sold 45 T-shirts for \(10 each.

27 Sold 40 T-shirts for \)10 each.

Requirements

2. Provide a summary for the month, in both units and dollars, of the change in inventory in the following format:

Number of T-shirts

Dollar Amount

Beginning Balance

Add: Purchases

Less: Cost of goods sold

Ending Balance

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

1. Prepare a perpetual inventory record for the merchandise inventory using the FIFO inventory costing method.

Nutriset Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended March 31, 2019, Nutriset鈥檚 preliminary income statement, before the year-end adjustments, appears as follows:

NUTRISET FOODS

Income Statement (Partial)

Year Ended March 31, 2019

Net Sales Revenue \( 118,000

Cost of Goods Sold 47,000

Gross Profit \) 71,000

Nutriset has determined that the current replacement cost of ending merchandise inventory is \(19,500. Cost is \)24,000.

Requirements

1. Journalize the adjusting entry for merchandise inventory, if any is required.
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