33PGB_3 - 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

3. Prepare a perpetual inventory record, using the weighted-average inventory costingmethod, and determine the company’s cost of goods sold, ending merchandiseinventory, and gross profit. (Round weighted-average cost per unit to the nearestcent and all other amounts to the nearest dollar.)

Step-by-Step Solution

Answer

Answer

Cost of goods sold: $24,840

Ending Inventory: $5,740

Gross Profit: $7,880

Step 1: Perpetual inventory table under the weighted average 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				220	$72	$15,730
Jan 5				140	$72	$10,080	80	$72	$5,760
Jan 16	170	$86	$14,620				250	$82	$20,380
Jan 27				180	$82	$14,760	70	$82	$5,740
Total	300		$24,500	320		$24,840	70	$82	$5,740

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{=}\mathbf{(}\mathbf{140}\mathbf{\times }\mathbf{\$}\mathbf{100}\mathbf{)}\mathbf{+}\mathbf{(}\mathbf{180}\mathbf{\times }\mathbf{\$}\mathbf{104}\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{\$}\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{24}\mathbf{,}\mathbf{840} \\ \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{7}\mathbf{,}\mathbf{880} \end{gathered}$$