19E_2 - Horngren'S Financial And Managerial Accounting

Question

Question: Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

2. Compute the cost of goods sold, cost of ending merchandise inventory, and grossprofit using the LIFO inventory costing method.

Step-by-Step Solution

Answer

Cost of goods sold:$372

Ending Inventory:$73

Gross Profit:$112

Step-by-Step-Solution Step1: Perpetual Inventory Record using FIFO

Date	Purchase/opening	Sales	Balance
	Units	Cost per unit	Amount	Units	Cost per unit	Amount	Units	Cost per unit	Amount
Dec 1	13	$9	$117				13	$9	$117
8				8	$22	$176	5	$9	$45
14	16	$14	$224				5 16	$9 $14	$269
21				14	$14	$196	5 2	$9 $14	$73
Total	29		$341	22		$372	7	$9 $14	$73

Step 2: Computation of gross profit

$$\begin{gathered} GrossProfit=Netrevenue-Costofgoodssold \\ =\left(22\times \$22\right)-\$372 \\ =\$484-\$372 \\ =\$112 \end{gathered}$$