Question

Effie Company uses a periodic inventory system. Details for the inventory account for the month of...

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2020 are as follows:

Units

Per unit price

Total

Balance, 1/1/20

200

$5.00

$1,000

Purchase, 1/15/20

100

5.30

530

Purchase, 1/28/20

100

5.50

550


An end of the month (1/31/20) inventory showed that 160 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

A. $1120

B. $1600

C. $1532

D. $1188

Business   Accounting   
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Homework Answers

Answer #1

Total units available for sale =200+100+100 = 400 units

Units sold = Total units available for sale - Ending inventory

= 400 units - 160 units = 240 units

Particulars

No. of Units

Cost per unit

Total Value

Beginning Inventory

200

$5

$1,000

1/15/20 Purchase (240-200 units)

 40

$5.30

$212

Cost of goods sold_IFO method

$1,212

Sales = Units sold x sales price per unit

= 240 units x $10 per unit = $2,400

Gross profit for the month = Sales - Cost of goods sold

= $2,400 - $1,212

= $1,188

Option D. is correct answer.

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