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Chapter 6: Q34PGB_5 (page 370)

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

5. Compute gross profit for January using FIFO, LIFO, and weighted-average inventorycosting methods.

Short Answer

Expert verified

Gross profit under FIFO, LIFO, and Average cost is $4,640, $4,470, $4,610, respectively.

Step by step solution

01

Computation of total revenue

TotalRevenue=SalevalueofJan3+SalevalueofJan21=45脳$83+70脳$85=$3,735+$5,950=$9,685

02

Gross profit under FIFO

GrossProfit=TotalRevenue-COGSunderFIFO=$9,685-$5,045=$4,640

03

Gross profit under LIFO

GrossProfit=TotalRevenue-COGSunderLIFO=$9,685-$5,215=$4,470

04

Gross profit under the weighted average method

GrossProfit=TotalRevenue-COGSunderweightedaverage=$9,685-$5,075=$4,610

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Most popular questions from this chapter

Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of \(4,290. During the month, Fit Gym purchased and sold merchandise on account as follows:

Jan. 5 Purchase 156 crates @ \) 64 each

13 Sale 180 crates @ \( 100 each

18 Purchase 114 crates @ \) 75 each

26 Sale 150 crates @ $ 116 each

Requirements

4. If the business wanted to pay the least amount of income taxes possible, which method would it choose?

Question:This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and continued through Chapter 5.

Consider the December transactions for Crystal Clear Cleaning that were presentedin Chapter 5. (Cost data have been removed from the sale transactions.) Crystal Clearuses the perpetual inventory system.

Dec. 2 Purchased 1,000 units of inventory for \(4,000 on account from Sparkle

Company on terms, 5/10, n/20.

5 Purchased 1,200 units of inventory from Borax on account with terms

4/10, n/30. The total invoice was for \)6,000, which included a \(300

freight charge.

7 Returned 300 units of inventory to Sparkle from the December 2

purchase.

9 Paid Borax.

11 Sold 500 units of goods to Happy Maids for \)5,500 on account with

termsn/30.

12 Paid Sparkle.

15 Received 100 units with a sales price of \(1,100 of goods back from

customer Happy Maids.

21 Received payment from Happy Maids, settling the amount due in full.

28 Sold 500 units of goods to Bridget, Inc. on account for \)6,500. Terms

1/15,n/30.

29 Paid cash for utilities of \(550.

30 Paid cash for Sales Commission Expense of \)214.

31 Received payment from Bridget, Inc., less discount.

31 Recorded the following adjusting entries:

a. Physical count of inventory on December 31 showed 800 units of

goods on hand.

b. Depreciation, \(150.

c. Accrued salaries expense of \)2,100.

d. Estimated sales returns of \(1,500, with cost of \)540.

e. Prepared all other adjustments necessary for December (Hint: You willneed to review the adjustment information in Chapter 3 to determinethe remaining adjustments). Assume the cleaning supplies left atDecember 31 are $50.

Requirements

2. Journalize the transactions for December 11th, 28th, and 31st (adjusting entry aonly) using the perpetual inventory record created in Requirement 1.

During periods of rising costs, which inventory costing method produces the highest gross profit?

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.

Accounting for inventory using the perpetual inventory system鈥�

FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO, and weighted-average 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

4. Determine the company鈥檚 cost of goods sold for August using FIFO, LIFO, and weighted-average inventory costing methods.
See all solutions

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