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.

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

Answer 1

Solution:

Date	Transaction	Quantity	Price/cost	total
Oct-01	Beginning inventory	70	700	49000
Oct-07	Purchase	30	750	22500
Oct-14	sale	30	1200	36000
Oct-18	Purchase	50	775	38750
Oct-27	sale	40	1200	48000

Beginning inventory	70
Add: purchases	80
Units available for sale	150
Less: sale	70
Ending inventory	80

1.

FIFO Perpetual inventory:

Cost of goods sold = 70 x 700 = 49,000

Ending inventory = 22500 + 38750 = 61250

2.

LIFO periodic inventory:

cost of goods sold = (50 x 775) + (20 x 750) = 38750 + 15000 = 53,750

Ending inventory = (10 x 750) + (70 x 700) = 7500 + 49000 = 56,500

sales = 36000 + 48000 = 84,000

Gross profit = sales - cost of goods sold = 84000 - 53750 = 30,250