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Chapter 6: Q29PGA_5 (page 367)

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.

Short Answer

Expert verified

Gross profit under FIFO, LIFO, and average cost is $5,235, $5,140, $5,225 respectively.

Step by step solution

01

Step-by-Step SolutionStep 1: Computation of total revenue

TotalRevenue=SalevalueofAug3+SalevalueofAug21=45脳$85+85脳$88=$3,825+$7,480=$11,305

02

Gross profit under FIFO

GrossProfit=TotalRevenue-COGSunderFIFO=$11,305-$6,070=$5,235

03

Gross profit under LIFO

GrossProfit=TotalRevenue-COGSUnderLIFO=$11,305-$6,165=$5,140

04

Gross profit under the weighted average method

GrossProfit=TotalRevenue-COGSunderweightedaveraged=$11,305-$6,080=$5,225

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Most popular questions from this chapter

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

3. Prepare a perpetual inventory record for the merchandise inventory using the weighted-average inventory costing method.

What account is debited when recording the adjusting entry to write down merchandise inventory under the LCM rule?

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

2. How would the inventory error affect New York Pool Supplies鈥檚 cost of goodssold and gross profit for the year ended December 31, 2020, if the error is not correctedin 2019?

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?

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

4. Which method results in the largest gross profit, and why?
See all solutions

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