Question

Modern Lifestyle Furniture began June with merchandise inventory of 45 sofas that cost a total of $31,500. During the month, Modern purchased and sold merchandise on account as follows:

June 7	Purchase	25 sofas @ $750 each
14	Sale	30 sofas @ $1,150 each
18	Purchase	50 sofas @ $775 each
27	Sale	35 sofas @ $1,200 each

Prepare a perpetual inventory record, using the FIFO inventory costing method, and determine the company's cost of goods sold, ending merchandise inventory, and gross profit.

Answer 1

Beginning inventory cost per sofa = $31,500 / 45 = $700

Date	Cost of sofas purchased	Cost of sofas sold	Ending inventory
Beginning inventory			45*$700 = $31,500
June 7	25*$750 = $18,750		45*$700 = $31,500 25*$750 = $18,750
June 14		30*$700 = $21,000	15*$700 = $10,500 25*$750 = $18,750
June 18	50*$775 = $38,750		15*$700 = $10,500 25*$750 = $18,750 50*$775 = $38,750
June 27		15*$700 = $10,500 20*$750 = $15,000	5*$750 = $3,750 50*$775 = $38,750

Sales = (30*$1,150) + (35*$1,200)

= $34,500 + $42,000

= $76,500

Cost of goods sold = $21,000 + $10,500 + $15,000 = $46,500

Ending merchandise inventory = $3,750 + $38,750 = $42,500

Gross profit = Sales - Cost of goods sold

= $76,500 - $46,500

= $30,000