Question

Great Adventures Problem AP6-1 [The following information applies to the questions displayed below.] Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from Kayaking, rain, fishing, or even diving up to 100 feet won't damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2022. All watches are sold for $491 each. Jul. 17 Purchased 41 watches for $5,781 ($141 per watch) on account. Jul. 31 Sold 31 watches for $15,221 cash. Aug. 12 Purchased 31 watches for $4,681 $151 per watch) cash. Aug. 22 Sold 21 watches for $10,311 on account. Sep. 19 Paid for watches purchased on July 17. Sep. 27 Receive cash of $20,400 for watches sold on account on August 22. Oct. 27 Purchased 71 watches for $11,431 ($161 per watch) cash. Nov. 20 Sold 81 watches for $39,771 cash. Dec. 4 Purchased 102 watches for $17,442 ($171 per watch) on account. Dec. 8 Sold 31 watches for $15,221 on account.

Answer 1

Answer 1(a):

Sales Revenue Cost of Goods Sold Ending Inventory $85,434 $25,484 $13,851

Working:

We tabulate below the information given on inventory flow:

Units Purchase Cost per unit Total 411 $141 $5,781 Sales Units 31 $151 $4,681 Date Jul. 17 Jul. 31 Aug. 12 Aug. 22 Oct. 27 Nov. 20 Dec. 4 Dec. 8 21 Event Purchase Sales Purchase Sales Purchase Sales Purchase Sales Total 71 $161 $11,431 81 102 $171 $17,442 31 245 $39,335 164

Ending inventory units = Beginning inventory + Units purchased - Units sold = 0 + 245 - 164 = 81 units

Under FIFO method,

Ending inventory is to be valued based latest purchases:

Ending inventory = 81 * 171 = $13,851

Cost of Goods sold = Beginning inventory + Net purchases - Ending inventory = 0 + 39335 - 13851 = $25,484

Answer 1(b):

GREAT ADVENTURES, INC. Partial Income Statement For the Year Ended December 31, 2022 Sales Revenue $85,434 Cost of Goods Sold $25,484 Gross Profit $59,950