The beginning inventory at Funcky Party and data on purchases and sales for a th

Question

The beginning inventory at Funcky Party and data on purchases and sales for a three month period ending March 31, 2016 are as follows:Jan 1 inventory 2,600 54.00 140,400 Jan.10 purchase 7000 62.00 434,000 Jan 28 sale 3,850 108.00 415.800 Jan 30 sale 1,300 109.00 140,400 Feb 5 sale 500 108.00 54,000 Feb 10 purchase 17,500 64.00 1,120,000 Feb16 sale 8,700 113.00 983,100 Feb 28 sale 8,600 113.00 971,800 March 5 purchase 14,000 65.00 918,400 Mar 14 sale 10,100 113.00 1,141,300 Mar 25 purchase 3,300 66.00 217,800 March 30 sale 7,750 113.00 875,750 1).Record the inventory, purchase, and cost of merchandise sole data in a perpetual inventory system record similar to the one illustrated in ex.4 using first in first out method? 2). Determine the total sales and total cost of merchandise sold for the period. Journalize the entries in the sale and cost of the merchandise sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the chart of accounts for exact wording of account titles. 3). Determine the gross profit from sales for the period. 4). Determine the inventory cost as of March 31, 2016 5). Based upon the preceding data, would you expect the inventory using the last in first out method to be higher or lower?


The beginning inventory at Funcky Party and data on purchases and sales for a three month period ending March 31, 2016 are as follows:Jan 1 inventory 2,600 54.00 140,400 Jan.10 purchase 7000 62.00 434,000 Jan 28 sale 3,850 108.00 415.800 Jan 30 sale 1,300 109.00 140,400 Feb 5 sale 500 108.00 54,000 Feb 10 purchase 17,500 64.00 1,120,000 Feb16 sale 8,700 113.00 983,100 Feb 28 sale 8,600 113.00 971,800 March 5 purchase 14,000 65.00 918,400 Mar 14 sale 10,100 113.00 1,141,300 Mar 25 purchase 3,300 66.00 217,800 March 30 sale 7,750 113.00 875,750 1).Record the inventory, purchase, and cost of merchandise sole data in a perpetual inventory system record similar to the one illustrated in ex.4 using first in first out method? 2). Determine the total sales and total cost of merchandise sold for the period. Journalize the entries in the sale and cost of the merchandise sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the chart of accounts for exact wording of account titles. 3). Determine the gross profit from sales for the period. 4). Determine the inventory cost as of March 31, 2016 5). Based upon the preceding data, would you expect the inventory using the last in first out method to be higher or lower?

Explanation / Answer

1.

2. Total cost of merchandise sold (calculated in part1.) = $2,584,900

Total Sales = 415800+140400+54000+983100+971800+1141300+875750= $4,582,150

Journal entries:

Cost of merchandise sold                   2,584,900

                    Inventory                                         2,584,900

Account Receivables                         4,582,150

                    Sales                                              4,582,150

3. Gross profit = Sales - Cost of merchandise sold = 4582150-2584900 = $1,997,250

4. Inventory cost (calculated in part 1.) = 300@65 + 3300@66 = $237,300

5. If we use Last in First out method of inventory valuation, the value would be lower tha $237,300 because the inventory purchased at lower cost purchased first will still be there in ending inventory. The merchandise purchased later at higher cost is sold first.

Opening+Purchases Cost of Sales Date Particulars Units Price Cost Units Price Cost Balance Detail 1-Jan Opening inventory 2,600 54 140,400 140,400 2600@54 10-Jan Purchases 7,000 62 434,000 574,400 2600@54+7000@62 28-Jan Sales 2,600 54 140,400 434,000 1,250 62 77,500 356,500 5750@62 30-Jan Sales 1,300 62 80,600 275,900 4450@62 5-Feb Sales 500 62 31,000 244,900 3950@62 10-Feb Purchases 17,500 64 1,120,000 1,364,900 3950@62+17500@64 16-Feb Sales 3,950 62 244,900 1,120,000 4,750 64 304,000 816,000 12750@64 28-Feb Sales 8,600 64 550,400 265,600 4150@64 5-Mar Purchases 14,000 65 910,000 1,175,600 4150@64+14000@65 14-Mar Sales 4,150 64 265,600 910,000 5,950 65 386,750 523,250 8050@65 25-Mar Purchases 3,300 66 217,800 741,050 8050@65+3300@66 30-Mar Sales 7,750 65 503,750 237,300 300@65+3300@66 Total 2,584,900

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