Question

tory Costing nal Instructions a. Should Carrie's Car Emporium use specific identification or one of the two cost formulas (FIFO or weighted average) instead? Explain. b. Calculate ending inventory and cost of goods sold using specific identification. c. Prepare the journal entry to record the December 22 cash sale. E6.4 (LO 2) AP On May 1, Black Bear Company had 400 units of inventory on hand, at a cost of $4.00 each. The company uses a perpetual inventory system. All purchases and sales are on account. A record of inventory transactions for the month of May for the company is as follows: Purchases Sales May 4 1,300 @ $4.10 300 @ $7.00 14 700 @ $4.40 16 1,000 @ $7.00 500 @ $4.75 400 @ $7.50 Instructions . Calculate the cost of goods sold and ending inventory using FIEO repare journal entries to record the Maya purchase and the May 3 and 16 sales c. Calculate gross profit for May. May 3 18

Answer 1

Solution: cost of goods sold Ending inventory 5455 b) Date Account title May-04 Inventory Accounts payable (1300*4.10) Debit Credit 5330 5330 2100 May-03 Account receivable sales revenue - 2100 (300* 7) 1200 cost of goods sold Inventory 7000 May-16 Account receivable sales revenue 7000 (1000*7) 4090 cost of goods sold Inventory (400+3690) sales=300*7+1000*7+400*7.5 Less: COGS Gross profit 12100 6930 5170

wokring Perpetual FIFO: Goods Purchased #of units Cost per unit May-01 Cost of Goods Sold Cost per unit Cost of Date #of Inventory Balance #of Cost per unit 400 @ 4.00 = 1600 4.00 = 1,200.00 May-03 May-04 1300 @ 4.10 100 100@ 1300 @ 4.00) = 400 4.00 = 400 4.10 5330 5730 4.00 = 400.00 4.10 = 1 5330 4.40 = 3080 8810 May-14 700 @ | 100 @ 1300 @ 700 May-16 100 @ 900 @ 4.10 = 1 3690 400 700 @ @ 4.10 = 1 4.40 = || 1640 3080 4720 400 @ 4.10 = May-18 May-29 500 @ 4.75 1640 700 @ | 700 @ 500 @ 6930 1200 4.40 = 1 4.40 = 4.75 = 3080 3080 2375 5455 Balance 1700