Question

Use the information below to determine the sales revenue, cost of goods sold and gross profit...

Use the information below to determine the sales revenue, cost of goods sold and gross profit that would be reported for the company related to the March 16 sale assuming the company uses LIFO inventory valuation and a perpetual inventory system.

January 1: Purchased 100 units at $10 per unit

February 5: Purchased 60 units at $12 per unit

March 16: Sold 40 units for $16 per unit

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Homework Answers

Answer #1

Under the Last in first out (LIFO) method of inventory valuation, Cost of goods sold consists of the units from recent purchases. Ending inventory consists of the units from beginning inventory and earliest purchases.

Date Particulars Cost of goods purchased Cost of goods sold Ending inventory
January 1 Purchases 100*$10 = $1,000 100*$10 = $1,000
February 5 Purchases 60*$12 = $720

100*$10 = $1,000

60*$12 = $720
March 16 Sales 40*$12 = $480

100*$10 = $1,000

20*$12 = $240

Sales revenue = 40 units * $16 per unit = $640

Cost of goods sold = $480

Gross profit = Sales revenue - Cost of goods sold

= $640 - $480

= $160

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