Question

P7-3 Comparing and Contrasting the Effects of Inventory Costing Methods on Financial Statement Elements LO7-2, 7-3 Neverstop Corporation sells item A as part of its product line. Information about the beginning inventory purchases, and sales of item A are given in the following table for the first six months of 2017. The company uses a perpetual inventory system: Purchases Sales Number of Units Sales Price Number of Units 590 Unit Cost $4.30 Date January 1 (beginning inventory) January 24 February 8 March 16 June 11 390 $5.80 690 $4.40 650 $6.00 390 $4.55 Required: 1. Compute the cost of ending inventory by using the weighted average costing method. (Do not round intermediate calculations and round the final answer to 2 decimal places.) Ending inventory 2. Compute the gross profit for the first six months of 2017 by using the FIFO costing method. (Do not round intermediate calculations and round the final answer to 2 decimal places.) Gross profit

Only question 2 (gross profit)

Answer 1

1.

W. Avg		Cost of Goods Available for Sale			Cost of Goods Sold			Ending Inventory
		Quantity	Unit Cost	Amount	Quantity	Unit Cost	Amount	Quantity	Unit Cost	Amount
Jan-01	Beginning Inventory	590	$              4.30	$      2,537.00				590	$              4.30	$      2,537.00
Jan-24	Sales				390	$              4.30	$      1,677.00	200	$              4.30	$         860.00
Feb-08	Purchase	690	$              4.40	$      3,036.00				200	$              4.30	$         860.00
								690	$              4.40	$      3,036.00
								890	$              4.38	$      3,896.00
Mar-16	Sales				650	$              4.38	$      2,845.39	240	$              4.38	$      1,050.61
Jun-11	Purchase	390	$              4.55	$      1,774.50				240	$              4.38	$      1,050.61
								390	$              4.55	$      1,774.50
		1670		$      7,347.50	1040		$      4,522.39	630	$              4.48	$      2,825.11

Ending Inventory = $4522.39

2.

FIFO		Cost of Goods Available for Sale			Cost of Goods Sold			Ending Inventory
		Quantity	Unit Cost	Amount	Quantity	Unit Cost	Amount	Quantity	Unit Cost	Amount
Jan-01	Beginning Inventory	590	$              4.30	$      2,537.00				590	$              4.30	$      2,537.00
Jan-24	Sales				390	$              4.30	$      1,677.00	200	$              4.30	$         860.00
Feb-08	Purchase	690	$              4.40	$      3,036.00				200	$              4.30	$         860.00
								690	$              4.40	$      3,036.00
Mar-16	Sales				200	$              4.30	$         860.00
					450	$              4.40	$      1,980.00	240	$              4.40	$      1,056.00
Jun-11	Purchase	390	$              4.55	$      1,774.50				240	$              4.40	$      1,056.00
								390	$              4.55	$      1,774.50
		1670		$      7,347.50	1040		$      4,517.00	630		$      2,830.50

Gross Profit = Sales - Cost of Goods Sold
= 390 x $5.80 + 650 x $6 - 4517 = $1645