33PGB_2 - 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

2. Prepare a perpetual inventory record, using the LIFO 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: $25,800

Ending Inventory: $4,550

Gross Profit: $6,920

Step 1: Perpetual inventory table under the LIFO 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				130   10	$76 $65	$10,530	80	$65	$5,200
Jan 16	170	$86	$14,620				80 170	$65 $86	$19,820
Jan 27				170    10	$86 $65	$15,270	70	$65	$4,550
Total	300		$24,500	320		$25,800	70	$65	$4,550

Step 2: Computation of gross profit

$$\begin{gathered} \mathbf{Total}\mathbf{ }\mathbf{Revenue}\mathbf{=}\mathbf{Sale}\mathbf{ }\mathbf{value}\mathbf{ }\mathbf{of}\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{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{25}\mathbf{,}\mathbf{800} \\ \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{6}\mathbf{,}\mathbf{920} \end{gathered}$$