Question

2. Assume that JR Tire Store completed the following perpetual inventory transactions for a line of tires: May 1 Beginning merchandise inventory 16 tires @ $65 each 10 tires @ $78 each 11 Purchase 23 Sale 12 tires @ $90 each 26 14 tires @ $80 each Purchase Sale 29 15 tires @ $90 each Requirement: 1) Compute cost of goods sold and gross profit using the FIFO inventory costing method. 2) Compute cost of goods sold and gross profit using the LIFO inventory costing method.

Answer 1

Compute cost of goods sold and gross profit using the FIFO and LIFO inventory costing method as follows:

	FIFO	LIFO
Sales	$2,430	$2,430
Less: Cost of goods sold	$1,900	$2,095
Gross profit	$530	$335

Therefore,

1. Cost of goods sold and gross profit using the FIFO inventory costing method are $1,900 and $530 respectively.

2. Cost of goods sold and gross profit using the LIFO inventory costing method are $2,095 and $335 respectively.

Workings:

	FIFO	LIFO
Sales	=(12*90)+(15*90)	=(12*90)+(15*90)
Less: Cost of goods sold	=(16*65)+(10*78)+(1*80)	=(14*80)+(10*78)+(3*65)
Gross profit	=B2-B3	=C2-C3