Question

problem 7-1A, I need answers 1-5!

Beginning merchandise inventory Purchases (net) Merchandise available for sale 860,000 $ 960,000 oblems: Series A 5,750 PR 7-1A FIFO perpetual inventory OBJ. 2,3 The beginning inventory at Funky Party Supplies and data on purchases and sales for a three-month period ending March 31, 2016, are as follows: Per Date Jan. 1 10 28 30 Transaction Inventory Purchase Sale Sale Number of Units 2,500 7,500 3,750 1,250 Unit $60.00 68.00 120.00 120.00 $150,000 510,000 450,000 150,000

Answer 1

FIFO method: As per FIFO method of Inventory, the goods first purchased are sold first and the closing shall comprise for the latest purchased goods 1. Recording of Inventory purchases, Cost of goods sold in a perpetual inventory system Date Purchases Cost of goods sold Inventory Total Cost (S) (S) Quantity Unit Total Cost Quantity Unit Total Cost Quantity Unit (S) (S) (S) (S) 2,500 Jan 1 60.00 150,000 150,000 Jan 10 7,500 68.00 510,000 2,500 60.00 7,500 68.00 510,000 60.00 Jan 28 2,500 150,000 1.250 85,000 68.00 6,250 68.00 425,000 340,000 306,000 306,000 70.00 1,260,000 Jan 30 1,250 68.00 85,000 5,000 68.00 Feb 5 500 68.00 34,000 4,500 68.00 Feb 10 68.00 18,000 70.00 1,260,000 4,500 18,000 Feb 16 4,500 68.00 306,000 70.00 945,000 4,500 70.00 315,000 13,500 5,000 595,000 Feb 28 8,500 70.00 70.00 350,000 70.00 Mar 5 15,000 71.60 1,074,000 5,000 350,000 71.60 1,074,000 15,000 70.00 Мar 14 5,000 350,000 71.60 71.60 5,000 358,000 10,000 10,000 716,000 Mar 25 2,500 72.00 180,000 71.60 716,000 2,500 72.00 180,000 8,750 71.60 Mar 30 71.60 626,500 1,250 89,500 2,500 72.00 180,000 Total 3,024,000 2,904,500 269,500 Hence, the total purchases are $3,024,000 and cost of goods sold are $2,904,500.

Calculations: A D E G Date Purchases Cost of goods sold Inventory 1 Quantity Unit (S) Total Cost Quantity (S) Unit Total Cost Quantity (S) Unit Total Cost (S) (S) 4 -H5 15 H6 16 -H7 .17 5 Jan 1 2500 60 6 Jan 10 7500 68 -В6*С6 2500 60 7500 68 7 8 Jan 28 2500 60 -ES FS E9 F9 -E10 F10 -E11 F11 - 7500-1250 68 H9 19 - H10 110 -H11* I11 3750-2500 68 10 Jan 30 1250 68 6250-1250 68 11 Feb 5 500 68 -5000-500 68 4500 12 Feb 10 18000 70 B12 C12 68 H12 112 18000 70 H13 113 13 E14 F14 -E15 F15 -E16 F16 14 Feb 16 4500 68 9000-4500 70 18000-4500 70 - H15 . 1 15 H16 116 -H17 I17 15 16 Feb 28 8500 70 13500-8500 70 71.6 B17 C17 5000 17 Mar 5 15000 70 15000 71.6 H18 118 18 -E19*F19 19 Mar 14 5000 70 15000-5000 71.6 -H20 120 10000-5000 71.6 -E20*F20 20 21 Mar 25 2500 72 -В21°С21 10000 71.6 H21 121 =H22 122 2500 72 22 71.6 E23 F23 8750 10000-8750 71.6 H23 123 23 Mar 30 =H24 124 2500 72 24 =SUM(D6:D24) SUM(G8:G23) J23+J24 25 Total 2. Calculate the total sales and total cost of merchandise sold for the period: Particulars Sale on Jan 28 Sale on Jan 30 Sale on Feb 5 Sale on Feb 16 Sale on Feb 28 Sale on Mar 14 Sale on Mar 30 Total sales for the period S Amount of sale 450,000 150,000 60,000 1,125,000 1,062,500 1,250,000 1,093,750 5,191,250 Hence, the total sales are $5,191,250 and total cost of merchandise sold (as per requirement 1) are $2,904,500

Journal entries for total sales and total cost of merchandise sold for the period: Particulars Debit Date Credit Accounts receivable $5,191,250 Sales revenue $5,191,250 (To record the total sales for the period) Date Particulars Debit Credit Cost of goods sold $2,904,500 Inventory (To record the total cost of merchandise goods sold) $2,904,500 3. Calculate the gross profit: Gross profit is the difference between sales and the cost of goods sold Particulars Amount Sales $ 5,191,250 Less: Cost of goods sold 2,904,500 Gross profit 2,286,750 Hence, the gross profit is $2,286,750.

4. Calculate the amount of ending inventory As per the perpetual record in requirement 1, the ending inventory at March 31 is 269,500. 5. Determine whether inventory using last-in first-out method to be higher or lower: As LIFO method, the latest goods are sold first, and the ending inventory comprises of per goods at the opening and goods purchased earlier As the cost per unit is lower at the beginning, the inventory using last-in first-out method is expected to be lower