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Chapter 6: Q33PGB_ 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

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

02

Computation of gross profit

TotalRevenue=Salevalueof5thJan+Salevalueof27Jan=(140脳$100)+(180脳$104)=14,000+$18,720=$32,720GrossProfit=TotalRevenue鈥�Costogfgoodssold=$32720鈥�$25800=$6,920

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Most popular questions from this chapter

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?

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

4. Which accounting principle or concept is most relevant to this situation?

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

2. Net sales revenue for October totaled $26,000. Compute Right Now鈥檚 gross profitfor October using each method.

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

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

Question:Empire State Carpets鈥檚 books show the following data. In early 2020, auditors foundthat the ending merchandise inventory for 2017 was understated by \(8,000 and thatthe ending merchandise inventory for 2019 was overstated by \)9,000. The ending merchandiseinventory at December 31, 2018, was correct.

2019

2018

2017

Net Sales Revenue

\( 220,000

\) 162,000

\( 176,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\)22,000

\(29,000

\)46,000

Net cost of purchase

132,000

90,000

76,000

Cost of goods available for sale

154,000

119,000

122,000

Less: Ending Merchandise Inventory

32,000

22,000

29,000

Cost of goods sold

122,000

97,000

93,000

Gross Profit

98,000

65,000

83,000

Operating Expenses

72,000

38,000

48,000

Net Income

\( 26,000

\) 27,000

$ 35,000

Requirements

1. Prepare corrected income statements for the three years.
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