Question

Dec. 1

Beginning merchandise inventory

13

units @

$11

each

8

Sale

9

units @

$24

each

14

Purchase

17

units @

$15

each

21

Sale

14

units @

$24

each

Assume that

Upper J Upper L ToysJ L Toys

store bought and sold a line of dolls during

DecemberDecember

as​ follows:

LOADING...

​(Click the icon to view the​ transactions.)

Upper J Upper L ToysJ L Toys

uses the perpetual inventory system.Read the requirements.

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Requirement 1. Compute the cost of goods​ sold, cost of ending merchandise​ inventory, and gross profit using the FIFO inventory costing method.

Begin by computing the cost of goods sold and cost of ending merchandise inventory using the FIFO inventory costing method. Enter the transactions in chronological​ order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual​ record, calculate the quantity and total cost of merchandise inventory​ purchased, sold, and on hand at the end of the period.​ (Enter the oldest inventory layers​ first.)

	Purchases			Cost of Goods Sold			Inventory on Hand
		Unit	Total		Unit	Total		Unit	Total
Date	Quantity	Cost	Cost	Quantity	Cost	Cost	Quantity	Cost	Cost
Dec. 1
Dec. 8
Dec. 14
Dec. 21
Totals

Compute the gross profit using the using the FIFO inventory costing method.

Gross profit is $

using the FIFO inventory costing method.

Requirement 2. Compute the cost of goods​ sold, cost of ending merchandise​ inventory, and gross profit using the LIFO inventory costing method.

Begin by computing the cost of goods sold and cost of ending merchandise inventory using the LIFO inventory costing method. Enter the transactions in chronological​ order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual​ record, calculate the quantity and total cost of merchandise inventory​ purchased, sold, and on hand at the end of the period. ​(Enter the oldest inventory layers​ first.)

	Purchases			Cost of Goods Sold			Inventory on Hand
		Unit	Total		Unit	Total		Unit	Total
Date	Quantity	Cost	Cost	Quantity	Cost	Cost	Quantity	Cost	Cost
Dec. 1
Dec. 8
Dec. 14
Dec. 21
Totals

Compute the gross profit using the using the LIFO inventory costing method.

Gross profit is $

using the LIFO inventory costing method.

Requirement 3. Which method results in a higher cost of goods​ sold?

The method with the higher cost of goods sold is

▼

FIFO.

LIFO.

neither, they are equal.

Requirement 4. Which method results in a higher cost of ending merchandise​ inventory?

The method with the higher cost of ending merchandise inventory is

▼

FIFO.

LIFO.

neither, they are equal.

Requirement 5. Which method results in a higher gross​ profit?

The method with the higher gross profit is

▼

FIFO.

LIFO.

neither, they are equal.

Enter any number in the edit fields and then continue to the next question.

Answer 1

Solution 1: Calculation of the cost of goods​ sold, cost of ending merchandise​ inventory, and gross profit using the FIFO inventory costing method.

Date	Purchased			Cost of Goods Sold			Balance in Inventory
	Units	Unit Cost $	Total $	Units	Unit Cost $	Total $	Units	Unit Cost $	Total $
Dec-01							13	11	143.00
Dec-08				9.00	11.00	99.00	4	11.00	44.00
Dec-14	17	15.00	255				4	11.00	44.00
							17	15.00	255.00
							21		299.00
Dec-21				4.00	11.00	44.00	7	15	105.00
				10.00	15.00	150.00
Totals	17		255.00	23.00		293.00	7	15	105.00

Calculation of gross profit using the using the FIFO inventory costing method:

Sales = (9 units x $24) + (14 units x $24) = $552

Less: Cost of goods sold                            = $293

Gross Profit under FIFO method             = $259

Solution 2: Calculation of the cost of goods​ sold, cost of ending merchandise​ inventory, and gross profit using the LIFO inventory costing method.

  

Date	Purchased			Cost of Goods Sold			Balance in Inventory
	Units	Unit Cost $	Total $	Units	Unit Cost $	Total $	Units	Unit Cost $	Total $
Dec-01							13	11	143.00
Dec-08				9.00	11.00	99.00	4	11.00	44.00
Dec-14	17	15.00	255				4	11.00	44.00
							17	15.00	255.00
							21		299.00
Dec-21				14.00	15.00	210.00	4	11.00	44.00
							3	15.00	45.00
							7		89.00
Totals	17		255.00	23.00		309.00	7		89.00

Calculation of gross profit using the using the LIFO inventory costing method:

Sales = (9 units x $24) + (14 units x $24) = $552

Less: Cost of goods sold                         = $309

Gross Profit under LIFO method          = $243

Solution 3) The method with the higher cost of goods sold is LIFO.

Solution 4) The method with the higher cost of ending merchandise inventory is FIFO.

Solution 5) The method with the higher gross profit is FIFO.