Question

The following transactions occurred for the month of May. Date 1-May Beginning Balance 2-May Purchase 3-May Purchase 10-May Sale 15-May Purchase 17-May Sale 30-May Sale Units Cost Total Sales Price 75 10 $750 60 11 $660 80 16 $1,280 125 $40 45 19 $855 60 $40 $40 $40 40 Calculate the cost of Goods Sold, Ending inventory, and Gross Profit for the month under FIFO. End of the month totals Cost of Goods Sold $ [ Ending Inventory $[ Gross Profit

Answer 1

Answer Cost of Goods sold = $2880 Ending Inventory = $665 Gross Profit = $6120 Workings 1 Calculation of cost of goods sold Total unit sold in the month of may = 125 +60 + 40 = 225 Unit The sold units include full 75 units at the beginning of the month and full 60 units purchased on may 2 and full 80 units purchased on May 3 and 10 units purchased on May 15. Therefore the cost of goods sold is calculated as follows 75 Units x $10 60 Units X $11 80 Units X $16 10 Units X $19 225 Units = = = = = $750 $ 660 $1280 $190 $2880 cost of goods sold = $2880

2 calculation of Ending inventory = inventory at the beginning + Total inventory purchased - Total inventory sold = 75+ (60 + 80 +45) - (125 +60 +40) = 75 + 185 - 225 = 35 Units The full 35 units belongs to the units purchased on May 15 at $19 So amount of ending inventory = 35 unit * $19 = $665 3 Calculation of Gross Profit under FIFO Gross Profit = Sales revenue - Cost of goods sold sales revenue = (125 units * $40) + (60 units * $40) + (40 Units * $40) = $9000 Therefore Gross Profit = $9000 - $2880 = $6120