The beginning inventory for Midnight Supplies and data on purchases and sales for a three-month period are shown in Problem 7-1A.
Instructions
1. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the first-in, first-out method and the periodic inventory system.
2. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the last-in, first-out method and the periodic inventory system.
3. Determine the inventory on March 31 and the cost of merchandise sold for the three-month period, using the weighted average cost method and the periodic inventory system. Round the weighted average unit cost to the nearest cent.
4. Compare the gross profit and the March 31 inventories, using the following column headings:
FIFO LIFO Weighted Average Sales Cost of merchandise sold Gross profit Inventory, March 31
Answer:
1. First-In, First-Out Method
Merchandise inventory, March 31................................................ $ 1,010,625
Cost of merchandise sold........................................................... 10,891,875
Supporting computations
Inventory:
Units in beginning inventory and purchased................................. 136,500
Units sold................................................................................ 125,250
Units in ending inventory........................................................... 11,250
7,500 units @ $90.00............................................................ $ 675,000
3,750 units @ $89.50............................................................ 335,625
11,250 units.......................................................................... $1,010,625
Cost of merchandise sold:
Beginning inventory, January 1................................................... $ 562,500
Purchases................................................................................. 11,340,000
Merchandise available for sale................................................... $11,902,500
Ending inventory, March 31......................................................... 1,010,625
Cost of merchandise sold........................................................... $10,891,875
* $1,912,500 + $4,725,000 + $4,027,500 + $675,000
2. Last-In, First-Out Method
Inventory, March 31..................................................................... $ 881,250
Cost of merchandise sold........................................................... 11,021,250
Supporting computations
Inventory:
7,500 units @ $75.00............................................................ $562,500
3,750 units @ $85.00............................................................ 318,750
11,250 units......................................................................... $881,250
Cost of merchandise sold:
Beginning inventory, January 1................................................... $ 562,500
Purchases................................................................................. 11,340,000
Merchandise available for sale................................................... $11,902,500
Ending inventory, March 31......................................................... 881,250
Cost of merchandise sold............................................................$11,021,250
3. Weighted Average Cost Method
Inventory, March 31.........................................................$ 981,000
Cost of merchandise sold................................................ 10,921,500
Supporting computations
$11,902,500
136,500 units
Inventory:
11,250 units × $87.20 = $981,000
Cost of merchandise sold:
Beginning inventory, January 1..........................................$ 562,500
Purchases..................................................................... 11,340,000
Merchandise available for sale..........................................$11,902,500
Ending inventory, March 31............................................. 981,000
Cost of merchandise sold................................................ $10,921,500
4.Weighted
FIFO LIFO Average
Sales$19,875,000 $19,875,000 $19,875,000
Cost of merchandise sold 10,891,875 11,021,250 10,921,500
Gross profit $ 8,983,125 $ 8,853,750 $ 8,953,500
Inventory, March 31 $ 1,010,625 $ 881,250 $ 981,000
* ($1,687,500 + $562,500 + $225,000 + $4,320,000 + $4,080,000 + $4,800,000 + $4,200,000)