Question

You have the following information for Splish Gems. Splish uses the periodic method of accounting for its inventory transactions. Splish only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

March	1		Beginning inventory 171 diamonds at a cost of $350 per diamond.
	3		Purchased 228 diamonds at a cost of $399 each.
	5		Sold 212 diamonds for $684 each.
	10		Purchased 383 diamonds at a cost of $436 each.
	25		Sold 448 diamonds for $741 each

Assume that Splish uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would Splish report under this cost flow assumption?

Cost of good Sold? $

Gross profit ?$

Answer 1

FIFO: Periodic Inventory System -	Units (a)	Unit Price (b)	Total Cost (a*b)
Cost of goods sold from -
Mar. 5 sales from Beginning inventory	171	$350	$59,850
Mar. 5 sales from Mar. 3 Purchases (212 - 171)	41	$399	$16,359
Mar. 25 sales from Mar. 3 Purchases (228 - 41)	187	$399	$74,613
Mar. 25 sales from Mar. 10 Purchases (448 - 187)	261	$436	$113,796
Cost of Goods Sold under FIFO	660		$264,618
Sales Revenue -
Mar. 5	212	$684	$145,008
Mar. 25	448	$741	$331,968
Total sales	660		$476,976
Less: Cost of Goods Sold			($264,618)
Gross Profit under FIFO			$212,358

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