Question

QUESTION 25 Sheldon Company had 2,000 units of inventory costing $10,000 in beginning inventory at July 1st During July, Sheldon Co. engaged in the following transactions: July 3rd - The company paid cash to purchase 1,000 units of inventory for $6,500. July 10th - The company paid cash to purchase 1,200 units of inventory for $8,400. July 24th – The company paid cash to purchase 250 units of inventory for $2,125. Throughout July, the company sold inventory 3,700 units of inventory for $44,400 cash. 25. Under a LIFO valuation method, what is the dollar value of Sheldon Co.'s cost of goods sold for July? A. $ 18,275 B.$ 23,275 C.$ 21,400 $ 44,400

Answer 1

Answer 25:

B. $ 23,275

Answer 26:

C. $ 3,750

Explanation:

Date	Particulars	Purchases	Cost of goods sold	Closing Inventory
		Units	Cost per unit	Amount ($)	Units	Cost per unit	Amount ($)	Units	Cost per unit	Amount ($)
Jul-01	Balance							2,000	5.00	10,000
Jul-03	Purchases	1,000	6.50	6,500
Jul-10	Purchases	1,200	7.00	8,400
Jul-24	Purchases	250	8.50	2,125
	Sales				250	8.50	2,125
					1,200	7.00	8,400
					1,000	6.50	6,500
					1,250	5.00	6,250	750	5	3,750
						Total	23,275

Answer 27:

A. $ 7,726

Explanation: Gross margin is sales less net purchases

Calculation:

Gross Purchases: $ 12,500

Purchase Return = $ 1,200

Net purchases - $ 12,500 - $ 1,200 = $ 11,300

Discount to be received = $ 11,300 x 2% = $ 226

Net payment to be made = $ 11,300 - $ 226 = $ 11,074

Thus, net purchases = $ 11,074

Gross Margin = $ 18,800 - $ 11,074 = $ 7,726