Harold Co. reported the following current-year purchases and sales data for its

Question

Harold Co. reported the following current-year purchases and sales data for its only product. Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 100 units @ $10 = $ 1,000 Jan. 10 Sales 90 units @$40 Mar. 14 Purchase 250 units @ $15 = 3,750 Mar. 15 Sales 140 units @$40 July 30 Purchase 400 units @ $20 = 8,000 Oct. 5 Sales 300 units @$40 Oct. 26 Purchase 600 units @ $25 = 15,000 Totals 1,350 units $ 27,750 530 units Assume that ending inventory is made up of 100 units from the March 14 purchase, 120 units from the July 30 purchase, and all 600 units from the October 26 purchase. Using the specific identification method, calculate the following. (Omit the "$" sign in your response.) (a) Cost of goods sold $ (b) Gross profit $

Explanation / Answer

These are the items that have been specifically identified. Assume that ending inventory is made up of 100 units from the March 14 purchase, 120 units from the July 30 purchase, and all 600 units from the October 26 purchase. You subtract them from the goods that are available for sale ($27,750) to calculate COGS. 27,750 - (100 x 15) - (120 x 20) - (600 x 25) = $8,850 COGS Subtract COGS from Sales to calculate gross profit. (90 x 40) + (140 x 40) + (300 x 40) - 8,850 = $12,350 gross profit

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