Question

The following data are available for the month of April for Dubai Company. The physical count at the end of the month showed that 130 are still available in the store.

Date	No. of Units / cost per unit	Total cost
April 1 inventory	120 units at $8.00 each	$ 960
April 10 purchase	200 units at $8.20 each	$ 1640
April 20 purchase	410 units at $8.50 each	$ 3485
April 28 purchase	110 units at $9.00 each	$ 990

Required:

1.Calculate the number of units sold during the month of April. Calculate the sales revenues of April assuming a selling price of $15 a unit.

2.Calculate cost of goods sold & cost of ending inventories assuming the LIFO method is used.

3.a.      Calculate the gross profit for the month of April assuming LIFO is used.

3.b.        It is the mid day of April 30 and in a couple of hours you will be submitting a report of April Activities. You are concerned that you have not achieved you target gross profit for the month of April. Your accountant wanted to help and suggested that you may do that by returning the last purchase you made yesterday on April 28. Do you agree with her? Explain.

Answer 1

Answers :

1) Units sold = Begining inventory + Purchases - Ending Inventory

                   = (120 + 720) - 130

units sold = 840 - 130 = 710

2) Calculation of cost of goods sold and Cost of ending Inventory (LIFO PERIODIC METHOD)

3a) Calculation of gross profit:

     

3b) 'NO' it is unethical to do so as per accounting norms. one should not return purchased goods inorder to earn desire profit, it is unethical.