33PGB_1 - Horngren'S Financial And Managerial Accounting

Question

Exercise World began January with merchandise inventory of 90 crates of vitamins that cost a total of \(5,850. During the month, Exercise World purchased and soldmerchandise on account as follows:

 

Jan. 2 Purchase 130 crates @ \) 76 each

5 Sale 140 crates @ \( 100 each

16 Purchase 170 crates @ \) 86 each

27 Sale 180 crates @ $ 104 each

 

Requirements

1. Prepare a perpetual inventory record, using the FIFO inventory costing method,and determine the company’s cost of goods sold, ending merchandise inventory,and gross profit.

Step-by-Step Solution

Answer

Answer

Cost of goods sold: $24,330

Ending Inventory: $6,020

Gross Profit: $8,390

Step 1: Perpetual inventory table under the FIFO method

	Purchases	Cost of goods sold	Inventory on hand
Date	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit Cost	Total Cost
Jan 1							90	$65	$5,850
Jan 2	130	$76	$9,880				90 130	$65 $76	$15,730
Jan 5				90 50	$65 $76	$  9,650	80	$76	$6,080
Jan 16	170	$86	$14,620				80 170	$76 $86	$20,700
Jan 27				80 100	$76 $86	$14,680	70	$86	$6,020
Total	300		$24,500	320		$24,330	70	$86	$6,020

Step 2: Computation of gross profit

$$\begin{gathered} \mathbf{Total}\mathbf{ }\mathbf{Revenue}\mathbf{=}\mathbf{Sale}\mathbf{ }\mathbf{valueof}\mathbf{ }\mathbf{5}\mathbf{th}\mathbf{ }\mathbf{Jan}\mathbf{+}\mathbf{Sale}\mathbf{ }\mathbf{value}\mathbf{ }\mathbf{of}\mathbf{ }\mathbf{27}\mathbf{th}\mathbf{ }\mathbf{Jan} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\left(140\times \$100\right)\mathbf{+}\left(180\times \$104\right) \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{14}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{18}\mathbf{,}\mathbf{720} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{32}\mathbf{,}\mathbf{720} \\ \mathbf{Gross}\mathbf{ }\mathbf{Profit}\mathbf{=}\mathbf{Total}\mathbf{ }\mathbf{Revenue}\mathbf{ }\mathbf{-}\mathbf{ }\mathbf{Cost}\mathbf{ }\mathbf{of}\mathbf{ }\mathbf{goods}\mathbf{ }\mathbf{sold} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{32}\mathbf{,}\mathbf{720}\mathbf{-}\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{330} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{8}\mathbf{,}\mathbf{390} \end{gathered}$$