Question

A Requirements X 1. 2. Compute cost of goods sold and gross profit using the FIFO inventory costing method. Compute cost of goods sold and gross profit using the LIFO inventory costing method. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted average cost per unit to the nearest cent and all other amounts to the nearest dollar.) Which method results in the largest gross profit, and why? 3. 4. Print Done Х 1 More Info Dec. 1 Beginning merchandise inventory 24 tires @ $61 each Dec. 11 Purchase 6 tires @ $76 each Dec. 23 Sale 16 tires @ $91 each 14 tires @ $86 each Dec. 26 Purchase Dec. 29 Sale 17 tires @ $91 each Print Done
Begin by computing the cost of goods sold and cost of ending merchandise inventory using the FIFO inventory costing method. Enter the transactions in chronological​ order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual​ record, calculate the quantity and total cost of merchandise inventory​ purchased, sold, and on hand at the end of the period.​ (Enter the oldest inventory layers​ first.)

Answer 1

FIFO 1, 2 & 3 Sales Cost of goods sold Gross profit $3,003 $2,178 $8251 Weighted LIFO Average $3,003 $3,003 $2,453 $2,299 $5501 $704 4 FIFO gives the largest net profit because when prices are rising the closing inventory is valued at higher cost In FIFO method the latest lot purchased in part of closing inventory since earlier lower price lots are part of cost of goods sold Working notes: Sales Date Units Sales Dec 23 Dec 29 16 17 Selling price $91 $91 Total $1,456 $1,547 $3,003 FIFO method with Perpetual inventory Purchase Unit Cost Total Cost Cost of Goods sold Unit Total Quantity Cost Cost Quantity Dec 1 Dec 11 Beginning Inventory Purchase 6 $76 $456 Inventory on Hand Unit Total Quantity Cost Cost 24 $61 $1,464 24 $61 $1,464 6 $76 8 $61 $488 6 $76 $456 8 $61 $488 6 $76 14 $86 $1,204 $456 Dec 23 Sale 16 $61 $976 Dec 26 Purchase 14 $86 $1,204 $456 Dec 29 Sale 6 $61 $76 $86 $488 $456 $258 $2,178 $86 11 11 $946 $946 $1,660 Totals Opening stock Add: Purchase $1,464 $1,660 $3,124 $946 $2,178 Less: Closing stock Cost of Goods sold LIFO Cost method with Perpetual Inventory Purchase Unit Cost Total Cost Cost of Goods sold Unit Total Quantity Cost Cost Quantity Inventory on Hand Unit Total Quantity Cost Cost 24 $61 $1,464 24 $61 $1,464 6 $76 $456 11 Dec 1 Dec 11 Beginning Inventory Purchase 6 $76 $456 Dec 23 Sale 6 $76 $61 $456 $610 10 14 Dec 26 Purchase 14 $86 $1,204 14 $61 $61 $86 $854 $854 $1,204 14 Dec 29 Sale 14 3 $86 $61 $1,204 $183 $2,453 11 $61 $671 $671 $1,660 11 Totals Opening stock Add: Purchase $1,464 $1,660 $3,124 $671 $2,453 Less: Closing stock Cost of Goods sold Weighted Average method using Perpetual Inventory system Purchase Unit Total Quantity Cost Cost Dec 1 Beginning Inventory Purchase 6 $76 $456 Cost of Goods sold Unit Total Quantity Cost Cost Cost Dec 11 6 $1,464 Inventory on Hand Unit Total Quantity Cost 24 $61.00 $1,464 24 $61.00 6 $76.00 $456 30 $64.00 $1,920 14 $64.00 $896 14 $64.00 $896 14 $86.00 $1,204 28 $75.00 $2,100 11 $75.00 $825 11 $75.00 $825 Sale 16 $64.00 $1,024 Dec 23 Dec 26 Purchase 14 $86 $1,204 Dec 29 17 $75.00 $1,275 $2,299 $1,660 Sale Totals Opening stock Add: Purchase $1,464 $1,660 $3,124 $825 $2,299 Less: Closing stock Cost of Goods sold