r provided with the following information for Guillaume Inc. for the month ended

Question

r provided with the following information for Guillaume Inc. for the month ended ou are P June 30, 2016. Guillaume uses the periodic method for inventory Date Description ?uantity Unit Cost or Selling Price June 1 Beginning inventory June 4 Purchase June 10 Sale June 11 Sale return June 18 Purchase June 18 Purchase return June 25 Sale June 28 Purchase 40 135 110 15 $40 70 70 46 46 75 50 10 65 30 Instructions (a) Calculate (i) ending inventory, (ii) cost of goods sold, (ii) gross profit and (iv) gros profit rate under each of the follows methods. Show all work (1) LIFO (2) FIFO (3) Average cost Solution # Extra Credit 1) LIFO METHOD-ENDING INVENTORY

Explanation / Answer

Beginning Inventory = 40 units @ $40 = $1,600

Purchases:
June 4 = 135 units @ $44 = $5,940
June 18 = 55 units @ $46 = $2,530
June 28 = 30 units @ $50 = $1,500

Purchase Return:
June 18 = 10 units @ $46 = $460

Cost of Goods available for Sale = Beginning Inventory + Purchases - Purchase Return
Cost of Goods available for Sale = $1,600 + $5,940 + $2,530 + $1,500 - $460
Cost of Goods available for Sale = $11,110

Number of units available for sale = 40 + 135 + 55 - 10 + 30
Number of units available for sale = 250

Sales:
June 10 = 110 units @ $70 = $7,700
June 25 = 65 units @ $75 = $4,875

Sales Return:
June 11 = 15 units @ $70 = $1,050

Number of units sold = 110 - 15 + 65
Number of units sold = 160

Net Sales = Sales - Sales Return
Net Sales = $7,700 + $4,875 - $1,050
Net Sales = $11,525

Number of units in Ending Inventory = Number of units available for sale - Number of units sold
Number of units in Ending Inventory = 250 - 160
Number of units in Ending Inventory = 90

LIFO:

Ending Inventory = 40 * $40 + 50 * $44
Ending Inventory = $3,800

Cost of Goods Sold = Cost of Goods available for Sale - Ending Inventory
Cost of Goods Sold = $11,110 - $3,800
Cost of Goods Sold = $7,310

Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = $11,525 - $7,310
Gross Profit = $4,215

Gross Profit Rate = Gross Profit / Net Sales
Gross Profit Rate = $4,215 / $11,525
Gross Profit Rate = 36.57%

FIFO:

Ending Inventory = 30 * $50 + 45 * $46 + 15 * $44
Ending Inventory = $4,230

Cost of Goods Sold = Cost of Goods available for Sale - Ending Inventory
Cost of Goods Sold = $11,110 - $4,230
Cost of Goods Sold = $6,880

Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = $11,525 - $6,880
Gross Profit = $4,645

Gross Profit Rate = Gross Profit / Net Sales
Gross Profit Rate = $4,645 / $11,525
Gross Profit Rate = 40.30%

Average Cost:

Cost per unit = Cost of Goods available for Sale / Number of units available for sale
Cost per unit = $11,110 / 250
Cost per unit = $44.44

Ending Inventory = 90 * $44.44
Ending Inventory = $4,000

Cost of Goods Sold = Cost of Goods available for Sale - Ending Inventory
Cost of Goods Sold = $11,110 - $4,000
Cost of Goods Sold = $7,110

Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = $11,525 - $7,110
Gross Profit = $4,415

Gross Profit Rate = Gross Profit / Net Sales
Gross Profit Rate = $4,415 / $11,525
Gross Profit Rate = 38.31%

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