Question

The following are the transactions for the month of July. Units Unit Cost Unit Selling Price July 1 Beginning Inventory 40 $ 10 July 13 Purchase 200 11 July 25 Sold ( 100 ) $ 14 July 31 Ending Inventory 140 Calculate cost of goods available for sale and ending inventory, then sales, cost of goods sold, and gross profit, under (a) FIFO, (b) LIFO, and (c) weighted average cost. Assume a periodic inventory system is used.

Answer 1

(a) FIFO (b) LIFO (c) weighted

average cost:

Cost of goods available for sale $2,600 $2,600 $2,600

Ending inventory 1,540 1,500 1,516

Sales $1,400 $1,400 1,400

Cost of goods sold 1,060 1,100 1,083

Gross profit $340 $300 $317

Step-by-step explanation:

a) Data and Calculations:

Units Unit Cost Unit Selling Price

July 1 Beginning Inventory 40 $ 10 $400

July 13 Purchase 200 11 2,200

July 25 Sold ( 100 ) $ 14 (1,400)

July 31 Ending Inventory 140

July 31 Goods available 240

Average unit cost = $10.83 ($2,600/240)

FIFO:

Cost of goods available for sale $2,600 ($400 + $2,200)

Ending inventory 1,540 (140 * $11)

Sales $1,400 ($14 * 100)

Cost of goods sold 1,060 (40 * $10 + 60 * $11)

Gross profit $340

LIFO:

Cost of goods available for sale $2,600 ($400 + $2,200)

Ending inventory 1,500 (40 * $10 + 100 * $11)

Sales $1,400 ($14 * 100)

Cost of goods sold 1,100 (100 * $11)

Gross profit $300

Weighted Average:

Cost of goods available for sale $2,600 ($400 + $2,200)

Ending inventory 1,516 (140 * $10.83)

Sales $1,400 ($14 * 100)

Cost of goods sold 1,083 (100 * $10.83)

Gross profit $317