Go Tro uses a periodic inventory system. At the beginning of the January 2017, i
ID: 2467378 • Letter: G
Question
Go Tro uses a periodic inventory system. At the beginning of the January 2017, inventory consisted of 2,000 units costing $8 each. On January 10, 4,500 units were purchased costing $9 each. Finally, on January 20, 3,000 more units were purchased costing $10.50 each. Unit sales consisted of 1,000 units on January 8 for $20 each, 4,000 units on January 15 for $22 each, and 1,500 units for $24 each on January 25.
a. Calculate cost of goods sold, ending inventory, and gross profit under the FIFO method.
b. Calculate cost of goods sold, ending inventory, and gross profit under the LIFO method.
c. Calculate cost of goods sold, ending inventory, and gross profit under the weighted average method.
Explanation / Answer
Ending inventory in units = Beginning inventory + Purchases – Sales
= 2,000 + (4,500 + 3,000) – (1,000 + 4,000 + 1,500)
= 9,500 – 6,500
= 3,000 units
Therefore, the ending inventory is 3,000 units.
a.
Calculate cost of goods sold, ending inventory, and gross profit under the FIFO method:
Ending inventory in dollar:
3,000 units @ $10.50 = $31,500
Cost of goods sold:
2,000 units @ $8 = $16,000
4,500 units @ $9 = $40,500
Gross profit:
Sales (1,000 units * $20) + (4,000 units *$22)+(1,500 units * $24) = $144,000
Less: Cost of goods sold = $56,500
Gross profit ($144,000 - $56,500) = $87,500
b.
Calculate cost of goods sold, ending inventory, and gross profit under the LIFO method:
Ending inventory in dollar:
2000 units @ $8 =$16,000
1000 units @$9 = $9,000
Cost of goods sold:
3,000 units @ $10.50 = $31,500
3,500 units @ 9.00 = $31,500
Gross profit:
Sales (1,000 units * $20) + (4,000 units *$22)+(1,500 units * $24) = $144,000
Less: Cost of goods sold = $63,000
Gross profit ($144,000 - $63,000) = $81,000
c.
Calculate cost of goods sold, ending inventory, and gross profit under the weighted average method:
Ending inventory in dollar:
3,000 units @ $9.75[($10.5 +$9)/2] = $29,250
Cost of goods sold:
2,000 units @ $8 = $16,000
4,500 units @ 8.50 = $38,250
Gross profit:
Sales (1,000 units * $20) + (4,000 units *$22)+(1,500 units * $24) = $144,000
Less: Cost of goods sold = $54,250
Gross profit ($144,000 - $54,250) = $89,750
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