Question

The Devlin Corporation, a diversified distribution company, purchases cartons of canned tennis balls from the Questor Company and markets the balls under the Devlin brand name. Devlin started operations on January 1, 2016. In the table below, Quarter 1 represents the time period from January 1, 2016 to March 31, 2016 and Quarter 2 represents the time period from April 1, 2016 to June 30, 2016. Devlin began operations on January 1, 2016 with no inventory.

Purchases and sales data for Devlin's first two quarters of business are shown below:

Quarter 1

Sales Purchases

Quarter 2

Sales Purchases

January February March

April May June

24,000 cartons at $50 per carton 9,000 cartons at $25 10,000 cartons at $30 12,000 cartons at $35

56,000 cartons at $65 per carton 14,000 cartons at $40 16,000 cartons at $45 20,000 cartons at $50

19. Calculate the Quarter 2 ending inventories (in dollars) using the LIFO inventory valuation method.

20. Calculate Quarter 2 GROSS PROFIT using the LIFO inventory valuation method.
21. Calculate the Quarter 2 ending inventories (in dollars) using the FIFO inventory valuation method.

22. Calculate Quarter 2 GROSS PROFIT using the FIFO inventory valuation method.

Answer 1

For the calculation of closing inventory(LIFO Method) of quarter 2, We need to calculate the opening inventory of Quater 2. As we know that closing inventory of quarter 1 becomes the opening inventory of quarter 2. The statement of Quater 1 is as follows.

So, we can find it the closing inventory 6,000@25 =150,000 and it becomes the opening inventory of Quater2

The statement of inventory evaluation of quarter 2 is as follows.

Answer 1

Closing inventory of Quarter 2(LIFO Method) = $100,000 (4,000 units @25)

Answer 2 Gross profit (LIFO Method)

Gross profit = Total sale - Cost of goods sold

Total sale = 50,000 X 65 = 3,250,000

Cost of goods sold of Quarter 2 = 2,250,000

Gross profit = 3,250,000 - 2,250,000 = 1,000,000

For the calculation of closing inventory(FIFO Method) of quarter 2, We need to calculate the opening inventory of Quater 2. As we know that closing inventory of quarter 1 becomes the opening inventory of quarter 2. The statement of Quater 1 is as follows.

So, we can find it the closing inventory 6,000@35 =210,000 and it becomes the opening inventory of Quater2

The statement of inventory evaluation of quarter 2 is as follows.

Answer 3

Closing inventory of Quarter 2(FIFO Method) = $200,000 (4,000 units @50)

Answer 4 Gross profit Quarter(FIFO Method)

Gross profit = Total sale - Cost of goods sold

Total sale = 50,000 X 65 = 3,250,000

Cost of goods sold of Quarter 2 = 2,210,000

Gross profit = 3,250,000 - 2,210,000 = 1,040,000