Question

You have the following information for Splish Brothers Inc.. Splish Brothers Inc. uses the periodic method of accounting for its inventory transactions. Splish Brothers Inc. only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

March 1		Beginning inventory 157 diamonds at a cost of $317 per diamond.
March 3		Purchased 219 diamonds at a cost of $364 each.
March 5		Sold 166 diamonds for $607 each.
March 10		Purchased 298 diamonds at a cost of $403 each.
March 25		Sold 414 diamonds for $588 each.

Assume that Splish Brothers Inc. uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

Answer 1

CALCULATION OF CLOSING INVENTORY USING LIFO METHOD
DATE	PARTICULARS	PURCHASE			SALE			CLOSING
		QUANTITY	PRICE	TOTAL COST	QUANTITY	PRICE	TOTAL COST	QUANTITY	PRICE	TOTAL COST
Mar-01	OPENING INVENTORY	$      157.00	$317.00	$   49,769.00				$   157.00	$317.00	$   49,769.00
Mar-03	PURCHASE	$      219.00	$364.00	$   79,716.00				$   157.00	$317.00	$   49,769.00
								$   219.00	$364.00	$   79,716.00
	TOTAL									$ 129,485.00
Mar-05	SALE				$   166.00	$607.00	$ 100,762.00	$   210.00	$364.00	$   76,440.00
Mar-10	PURCHASE	$      298.00	$403.00	$ 120,094.00				$   210.00	$364.00	$   76,440.00
								$   298.00	$403.00	$ 120,094.00
Mar-25	SALE				$   414.00	$588.00	$ 243,432.00	$     94.00	$588.00	$   55,272.00
	CLOSING INVENTORY							$     94.00	$588.00	$   55,272.00
CALCULATE OF COST OF GOODS SOLD
	PARTICULAR'S	AMOUNT
	TOTAL INVENTORY COST	$249,579.00
	LESS: CLOSING INVENTORY	$ 55,272.00
	COST OF GOODS SOLD	$194,307.00
CALCULATE OF GROSS PROFIT
	PARTICULAR'S	AMOUNT
	SALES	$344,194.00
	LESS: TOTAL INVENTORY	$249,579.00
	ADD: CLOSING STOCK	$ 55,272.00
	GROSS PROFIT	$149,887.00