Franklin Discount Store (FDS) made the following merchandise purchases and sales
ID: 2563959 • Letter: F
Question
Franklin Discount Store (FDS) made the following merchandise purchases and sales
during the month of May:
M
a
y
1
p
u
r
c
h
a
s
e
d
3
8
0
u
n
i
t
s
a
t
$
1
5
e
a
c
h
M
a
y
5
p
u
r
c
h
a
s
e
d
2
7
0
u
n
i
t
s
a
t
$
1
7
e
a
c
h
M
a
y
1
0
s
o
l
d
4
0
0
u
n
i
t
s
a
t
$
5
0
e
a
c
h
M
a
y
2
0
p
u
r
c
h
a
s
e
d
3
0
0
u
n
i
t
s
a
t
$
2
2
e
a
c
h
M
a
y
2
5
s
o
l
d
4
0
0
u
n
i
t
s
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$
5
0
e
a
c
h
(1) There was no beginning inventory and the company uses the periodic inventory
system. Compute sales, cost of goods sold and gross profit for FDS assuming:
(a) The FIFO method
(b) The Weighted Average method
(c) The LIFO method
(2) Assume the company uses the perpetual inventory system, compute the sales, cost of
goods sold and gross profit under the FIFO, Moving Average and LIFO methods.
Explanation / Answer
If franklin Discount Store uses Periodic inventory system
Closing inventory = Total purchases - sales (no opening inventory, hence not included)
= 380 units + 270 units + 300 units - 400 units -400 units
= 150 units
a) FIFO method
Cost of Closing inventory under periodic inventory system -FIFO
Most recent cost, May 20
150 units at $22 $3,300
Closing cost of 150 units May 31 $3,300
Cost of goods sold under periodic inventory system -FIFO
Opening Balance 0
Add cost of units purchase during the month
380units purchased on May 1st at $15 per unit $5,700
270units purchased on May 5th at $17 per unit $4,590
300units purchased on May 20th at $22 per unit $6,600 $16,890
Total cost of units available for sale $16,890
Less cost of closing inventory at May 31st $3,300
Total cost of 800 units sold during May $13,590
Gross profit under periodic inventory system -FIFO
Sales (800 units at $50 per unit) $40,000
Less cost of goods sold -$13,590
Gross Profit $26,410
b) Weighted Average method
Cost of Closing inventory under periodic inventory system - Weighted Average method
Weighted Average method cost
150 units at $17.78 $2,667
(380units*15 + 270units*17 + 300units*22= $16,890)/
(380units + 270units + 300units = 950
Closing cost of 150 units May 31 $2,667
Cost of goods sold under periodic inventory system - Weighted Average method
Opening Balance 0
Add cost of units purchase during the month
380units purchased on May 1st at $15 per unit $5,700
270units purchased on May 5th at $17 per unit $4,590
300units purchased on May 20th at $22 per unit $6,600 $16,890
Total cost of units available for sale $16,890
Less cost of closing inventory at May 31st -$2,667
Total cost of 800 units sold during May $14,223
Gross profit under periodic inventory system - Weighted Average method
Sales (800 units at $50 per unit) $40,000
Less cost of goods sold -$14,223
Gross Profit $25,777
c) LIFO method
Cost of Closing inventory under periodic inventory system -LIFO
Most earliest cost, May 1
150 units at $15 $2,250
Closing cost of 150 units May 31 $2,250
Cost of goods sold under periodic inventory system -LIFO
Opening Balance 0
Add cost of units purchase during the month
380units purchased on May 1st at $15 per unit $5,700
270units purchased on May 5th at $17 per unit $4,590
300units purchased on May 20th at $22 per unit $6,600 $16,890
Total cost of units available for sale $16,890
Less cost of closing inventory at May 31st -$2,250
Total cost of 800 units sold during May $14,640
Gross profit under periodic inventory system - LIFO
Sales (800 units at $50 per unit) $40,000
Less cost of goods sold -$14,640
Gross Profit $25,360
Note: In case of multiple questions only first full question (with all sub parts) needs to be answered.
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