Periodic Inventory by Three Methods The beginning inventory at Midnight Supplies

Question

Periodic Inventory by Three Methods

The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31, are as follows:

Required:

1. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the first-in, first-out method and the periodic inventory system.

2. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the last-in, first-out method and the periodic inventory system.

3. Determine the inventory on March 31 and the cost of merchandise sold for the three month period, using the weighted average cost method and the periodic inventory system. Round the weighted average unit cost to the nearest cent and final answers to the nearest dollar.

4. Compare the gross profit and the March 31 inventories, using the following column headings. Enter all amounts as positive numbers.

Date Transaction Number
of Units Per Unit Total Jan. 1 Inventory 7,500 $75.00 $562,500 10 Purchase 22,500 85.00 1,912,500 28 Sale 11,250 150.00 1,687,500 30 Sale 3,750 150.00 562,500 Feb. 5 Sale 1,500 150.00 225,000 10 Purchase 54,000 87.50 4,725,000 16 Sale 27,000 160.00 4,320,000 28 Sale 25,500 160.00 4,080,000 Mar. 5 Purchase 45,000 89.50 4,027,500 14 Sale 30,000 160.00 4,800,000 25 Purchase 7,500 90.00 675,000 30 Sale 26,250 160.00 4,200,000

Explanation / Answer

1) Merchandise inventory, March 31 $           10,10,625 Cost of merchandise sold $       1,08,91,875 2) Merchandise inventory, March 31 $             8,81,250 Cost of merchandise sold $       1,10,21,250 3) Merchandise inventory, March 31 $             9,80,975 Cost of merchandise sold $       1,09,21,525 4) FIFO LIFO Weighted Average Sales $       1,98,75,000 $       1,98,75,000 $       1,98,75,000 Cost of goods sold $       1,08,91,875 $       1,10,21,250 $       1,09,21,525 Gross Profit $           89,83,125 $           88,53,750 $           89,53,475 Inventory, March 31 $           10,10,625 $             8,81,250 $             9,80,975 Workings: Date Transaction Number of units per unit Total Date Transaction Number of units per unit Total Jan 1 Inventory                        7,500 $    75.00 $             5,62,500 Jan 28 Sale                     11,250 $ 150.00 $       16,87,500 10 Purchase                     22,500 $    85.00 $           19,12,500 30 Sale                        3,750 $ 150.00 $          5,62,500 Feb 10 Purchase                     54,000 $    87.50 $           47,25,000 Feb 5 Sale                        1,500 $ 150.00 $          2,25,000 Mar. 5 Purchase                     45,000 $    89.50 $           40,27,500 16 Sale                     27,000 $ 160.00 $       43,20,000 25 Purchase                        7,500 $    90.00 $             6,75,000 28 Sale                     25,500 $ 160.00 $       40,80,000 Mar. 14 Sale                     30,000 $ 160.00 $       48,00,000 Total                  1,36,500 $       1,19,02,500 30 Sale                     26,250 $ 160.00 $       42,00,000 Total                  1,25,250 $    1,98,75,000 Total units available for sale                  1,36,500 Total Units sold                  1,25,250 Total Ending Units                     11,250 FIFO stands for first in first out.It means inventory which is bought first is sold first. Costs of Ending Inventory will be calculated as follows: Date Transaction Number of units per unit Total Mar 25 Purchase                        7,500 $    90.00 $             6,75,000 Mar 5 Purchase                        3,750 $    89.50 $             3,35,625 Total                     11,250 $           10,10,625 Now, cost of goods available for sale $       1,19,02,500 Costs of Ending Inventory $           10,10,625 Costs of goods sold $       1,08,91,875 LIFO stands for last in first out.In this case, inventory which is bought last is sold first. So, Costs of ending inventory will be as follows: Jan 1 Inventory                        7,500 $    75.00 $             5,62,500 10 Purchase                        3,750 $    85.00 $             3,18,750 Total                     11,250 $             8,81,250 Now, cost of goods available for sale $       1,19,02,500 Costs of Ending Inventory $             8,81,250 Costs of goods sold $       1,10,21,250 Weighted Average cost = $       1,19,02,500 /                  1,36,500 = $                   87.20 Now, cost of goods available for sale $       1,19,02,500 Costs of Ending Inventory $             9,80,975 (11250*$ 87.20) Costs of goods sold $       1,09,21,525 Now, FIFO LIFO Weighted Average Sales $       1,98,75,000 $       1,98,75,000 $       1,98,75,000 Cost of goods sold $       1,08,91,875 $       1,10,21,250 $       1,09,21,525 Gross Profit $           89,83,125 $           88,53,750 $           89,53,475 Inventory, March 31 $           10,10,625 $             8,81,250 $             9,80,975

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