Q33PGB_ 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

Cost of goods sold: $25,800

Ending Inventory: $4,550

Gross Profit: $6,920

Step 1: Perpetual inventory table under the LIFO method

Step 2: Computation of gross profit

$$\begin{gathered} \mathbf{Total}\mathbf{ }\mathbf{Revenue}\mathbf{ }\mathbf{=}\mathbf{Sale}\mathbf{ }\mathbf{value}\mathbf{ }\mathbf{of}\mathbf{ }\mathbf{5}\mathbf{th}\mathbf{ }\mathbf{Jan}\mathbf{ }\mathbf{+}\mathbf{ }\mathbf{Sale}\mathbf{ }\mathbf{value}\mathbf{ }\mathbf{of}\mathbf{ }\mathbf{27}\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{(}\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{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{ }\mathbf{Total}\mathbf{ }\mathbf{Revenue}\mathbf{‐}\mathbf{Cost}\mathbf{ }\mathbf{ogf}\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{32720}\mathbf{‐}\mathbf{\$}\mathbf{25800} \\ \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}$$