The beginning inventory of Merchandise at Waldo Co. and data on purchases and sales for a three-month period are as follows:
Date Transaction Number of Units Per Unit Total
March 3 Inventory 60 $1500 $90,000
8 Purchase 120 1800 216,000
11 Sale 80 5000 400,000
30 Sale 50 5000 250,000
April 8 Purchase 100 2000 200,000
10 Sale 60 5000 300,000
19 Sale 30 5000 150,000
28 Purchase 100 2200 220,000
May 5 Sale 60 5250 315,000
16 Sale 80 5250 420,000
21 Purchase 180 2400 432,000
28 Sale 90 5250 472,500
Instructions
1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the first-in, first-out method.
2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account.
3. Determine the gross profit from sales for the period.
4. Determine the ending inventory cost
Accounting
TECH
DEGREE
To determine the beginning inventory, purchases, cost of merchandise sold, and ending inventory cost using the first-in, first-out (FIFO) method, we can follow these steps:
1. Create a perpetual inventory record:
Exhibit 3:
Date | Transaction | Units | Per Unit | Total
--------------------------------------------------
Mar 3 | Inventory | 60 | $1,500 | $90,000
Mar 8 | Purchase | 120 | $1,800 | $216,000
Mar 11 | Sale | 80 | $5,000 | $400,000
Mar 30 | Sale | 50 | $5,000 | $250,000
Apr 8 | Purchase | 100 | $2,000 | $200,000
Apr 10 | Sale | 60 | $5,000 | $300,000
Apr 19 | Sale | 30 | $5,000 | $150,000
Apr 28 | Purchase | 100 | $2,200 | $220,000
May 5 | Sale | 60 | $5,250 | $315,000
May 16 | Sale | 80 | $5,250 | $420,000
May 21 | Purchase | 180 | $2,400 | $432,000
May 28 | Sale | 90 | $5,250 | $472,500
2. Determine total sales and total cost of merchandise sold:
To find the total sales, sum up the "Total" column for all the sales transactions. In this case, add up the totals for the rows with "Sale" transactions from March to May: $400,000 + $250,000 + $300,000 + $150,000 + $315,000 + $420,000 + $472,500 = $2,307,500.
To find the total cost of merchandise sold, sum up the "Total" column for all the sales transactions. Based on the FIFO method, the cost of merchandise sold would be the cost of the inventory items sold earliest in the year. In this case, add up the totals for the rows with "Sale" transactions from March to May: $90,000 + $216,000 + $400,000 + $250,000 + $200,000 + $300,000 + $150,000 = $1,606,000.
3. Determine the gross profit from sales:
Gross profit is the difference between the total sales and the total cost of merchandise sold. In this case, the gross profit would be: $2,307,500 - $1,606,000 = $701,500.
4. Determine the ending inventory cost:
The ending inventory cost can be calculated by subtracting the total cost of merchandise sold from the sum of the cost of the remaining units in the perpetual inventory record. In this case, the ending inventory cost would be: ($90,000 + $216,000 + $220,000 + $432,000) - $1,606,000 = $352,000.
Please note that for further accuracy and to account for any possible adjustments or additional information, it is always best to consult accounting professionals or refer to specific guidelines and regulations relevant to your location and industry.