Question

Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2022. All watches are sold for $509 each.

Jul.		17		Purchased 59 watches for $9,381 ($159 per watch) on account.
Jul.		31		Sold 49 watches for $24,941 cash.
Aug.		12		Purchased 49 watches for $8,281 ($169 per watch) cash.
Aug.		22		Sold 39 watches for $19,851 on account.
Sep.		19		Paid for watches purchased on July 17.
Sep.		27		Receive cash of $14,400 for watches sold on account on August 22.
Oct.		27		Purchased 89 watches for $15,931 ($179 per watch) cash.
Nov.		20		Sold 99 watches for $50,391 cash.
Dec.		4		Purchased 118 watches for $22,302 ($189 per watch) on account.
Dec.		8		Sold 49 watches for $24,941 on account.

Required:

1-a. Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2022, assuming Suzie uses FIFO to account for inventory.

Answer 1

1. Sales revenue

= $24941 + $19851 + $50391 + $24941

= $120124

2. Cost of goods sold

It will include cost of opening stock and first purchase because of FIFO method.

Total sold units

= 49 + 39 + 99 + 49

= 236

So units purchased first upto 236 units will be considered as cost of goods sold

= $9381 + $8281 + $15931 + (39*$189)

= $40964

3. Ending inventory it will consist of recent purchases made

= (118-39) * $189

=$14931