Question

Chapter 5 – Inventory Cost Flow

The following information pertains to the inventory of sandals for Rainbow Shoe Shop for 2017:

Beginning Inventory, 1/1/2017              200 pairs @$18 each

Purchase April 15, 2017                         800 pairs @ $20 each

Purchase August 28, 2017                  1,200 pairs @ $24 each

During the year, Rainbow Shoe Shop sold 1,900 pairs of shoes for cash at a price of $40 each.

REQUIRED:

Calculate Cost of Goods Sold and Gross Profitthat would be recorded on the year ended December 31, 2017 income statement AND calculate the Ending Inventorythat would be reported on the December 31, 2017 balance sheet assuming that Rainbow Shoe Shop uses

FIFO

Weighted Average

Answer 1

Calculate following :

Under FIFO :

Beginning unit	200	3600
Purchase 15 april, 2017	800	16000
Purchase august 28,2017	1200	28800
Total	2200	48400
Ending inventory (300*24)	300	7200
Cost of goods sold (48400-7200)	1900	41200
Sales (1900*40)		76000
Gross profit		34800

Calculate following :

Under Weighted average :

Beginning unit	200	3600
Purchase 15 april, 2017	800	16000
Purchase august 28,2017	1200	28800
Total	2200	48400
Ending inventory (48400/2200)*300	300	6600
Cost of goods sold (48400/2200)*1900	1900	41800
Sales (1900*40)		76000
Gross profit		34200