Question

4) Samuel’s Manufacturing (SM) began October with merchandise inventory of 70 chairs that cost a total of $49,000. During the month, SM purchased and sold merchandise on account as follows:  

Oct 7	Purchase	30 chairs @ $750 each
14	Sale	30 chairs @ 1,200 each
18	Purchase	50 chairs @ $775 each
27	Sale	40 chairs @ $1,200 each

Prepare a perpetual inventory record, using the FIFO inventory costing method, and determine the company's cost of goods sold (COGS), and ending merchandise inventory. (20pts)

   

Date	Purchase			Cost of Goods Sold			Inventory On Hand
	Cost	Number	Total	Cost	Number	Total	Cost	Number	Total
Oct.1
Oct.7
Oct.14
Oct.18
Oct.27
Total

5) Refer to problem #4 above, what is the companies COGS and Gross Profit use periodic LIFO costing?

Answer 1

1)

Under FIFO method goods purchased first are sold first therefore sale made on 14th will be made from beginning inventory of 30 units , moreover sale made on 27th will also be made from beginning inventory as there are more units left.

Beginning inventory cost per unit = 49,000/70 = $700

Cost of goods sold

= 70*700

= $49,000

Ending inventory will be the remaining units

= 30*750 + 50*775

= 22,500 + 38,750

= $61,250

2)

Under LIFO method goods purchased last are sold first therefore sale made on 14th will be made from purchase made on 7th of 30 units and sale made on 27th will be made from purchase made on 18th of 40 units.

Cost of goods sold

= 30*750 + 40*775

= 22,500 + 31,000

= $53,500

Total sales

= 30*1,200 + 40*1,200

= 36,000 + 48,000

= $84,000

Gross profit = Sales - Cost of goods sold

= 84,000 - 53,500

= $30,500