Q28PGA_3 - Horngren'S Financial And Managerial Accounting

Question

Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of \(4,290. During the month, Fit Gym purchased and sold merchandise on account as follows

Jan. 5 Purchase                     156 crates @ \) 64 each

13 Sale                                    180 crates @ \( 100 each

18 Purchase                           114 crates @ \) 75 each

26 Sale                                    150 crates @ $ 116 each

 

Requirements

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

Step-by-Step Solution

Answer

Cost of goods sold: $21,555

Ending Inventory: $1,278

Gross Profit: $13,845

Step-by-Step Solution

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.							78	$55	$4,290
Jan 5.	156	$64	$9,984				234	$61	$14,274
Jan 13				180	$61	$10,980	54	$61	$3,294
Jan 18	114	$75	$8,550				168	$71	$11,928
Jan 26				150	$70.5	$10,575	18	$71	$1,278
Total	270		$18,534	330		$21,555	18	$71	$1,278

Step 2: Computation of gross profit

$$\begin{gathered} \mathrm{Total} \mathrm{Revenue} = \mathrm{Sale} \mathrm{value} \mathrm{of} 13\mathrm{th} \mathrm{Jan} + \mathrm{Sale} \mathrm{value} \mathrm{of} 26\mathrm{th} \mathrm{Jan} \\ =\left(180 \times \$100\right)+\left(150\times \$116\right) \\ =\$18,400 + \$17,400 \\ =\$35,400 \end{gathered}$$

$$\begin{gathered} \mathrm{Gross} \mathrm{Profit} = \mathrm{Total} \mathrm{revenue} - \mathrm{Cost} \mathrm{of} \mathrm{goods} \mathrm{sold} \\ =\$35,400-\$21,555 \\ =\$13,845 \end{gathered}$$