y discloses the following information for the month of August 2016 Aug. 01: Begi
ID: 2514309 • Letter: Y
Question
y discloses the following information for the month of August 2016 Aug. 01: Beginning inventory, 600 units@$5 each each. Aug.10: Sold 400 units @ $12 each Aug. 11: Purchased 1,600 units$6 each. Aug. 15: Sold 1,000 units@$12.50 each. Aug. 20: Purchased 1,000 units $6.50 each. Aug. 27: Sold 600 units@ $13.50 each. equired: 1. Assume the B uses periodic inventory system, compute cost of goods sold (COGS), ending inventory and gross profit under (a). FIFO (b). LIFO me the Breeze company uses perpetual inventory system, compute cost of goods sold (COGS), ending inventory and gross profit under (a). FIFO (b). LIFO 3. Explain the reason of higher gross profit under FIFO than LIFO?Explanation / Answer
STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC FIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Aug 600 5 3000 600 5 3000 Purchasse 11-Aug 1600 6 9600 1400 6 8400 200 6 1200 20-Aug 1000 6.5 6500 1000 6.5 6500 TOTAL 3200 19100 2000 11400 1200 7700 STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC LIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Aug 600 5 3000 600 5 3000 Purchasse 11-Aug 1600 6 9600 1000 6 6000 600 6 3600 20-Aug 1000 6.5 6500 1000 6.5 6500 TOTAL 3200 19100 2000 12500 1200 6600 FIFO LIFO COGS 11400 12500 ENDING INVENTORY 7700 6600 Sales (400*12+1000*12.5+600*13.50) 25400 25400 Gross Profit (Sales-COGS) 14000 12900 STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Aug 600 5 3000 10-Aug 400 5 2000 200 5 1000 11-Aug 1600 6 9600 200 5 1000 1600 6 9600 15-Aug 200 5 1000 800 6 4800 800 6 4800 20-Aug 1000 6.5 6500 800 6 4800 1000 6.5 6500 27-Aug 600 6 3600 200 6 1200 1000 6.5 6500 TOTAL 1600 16100 2000 11400 1200 7700 STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Aug 600 5 3000 10-Aug 400 5 2000 200 5 1000 11-Aug 1600 6 9600 200 5 1000 1600 6 9600 15-Aug 1000 6 6000 200 5 1000 600 6 3600 20-Aug 1000 6.5 6500 200 5 1000 600 6 3600 1000 6.5 6500 27-Aug 600 6.5 3900 200 5 1000 600 6 3600 400 6.5 2600 TOTAL 1600 16100 2000 11900 1200 7200 FIFO LIFO COGS 11400 11900 ENDING INVENTORY 7700 7200 Sales (400*12+1000*12.5+600*13.50) 25400 25400 Gross Profit (Sales-COGS) 14000 13500 Req 3: Gross profit is higher in FIFO due to rising prices of ivnentory, the ivnentory unlike LIFO is issued at hitorical cosyt whcich is lowerr than current prices. Hence, the cost of goods sold is lower resulting in higher gross profit
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