Cece W.

asked • 05/26/14

Can someone help me figure out these accounting problems PLEASE? I have been really struggling.

1. Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2014 are as follows:

Units Per unit price Total
Balance, 1/1/14 200 $5.00 $1,000
Purchase, 1/15/14 100 5.30 530
Purchase, 1/28/14 100 5.50 550

An end of the month (1/31/14) inventory showed that 160 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

A. $1,188


B. $1,120


C. $1,532


D. $1,600



2. Netta Shutters has the following inventory information.

July 1 Inventory 30 units @ $8.00
8 Purchase 120 units @ $8.30
17 Purchase 60 units @ $8.40
25 Purchase 90 units @ $8.80

A physical count of merchandise inventory on November 30 reveals that there are 90 units on hand. Assume a periodic inventory system is used. Ending inventory under FIFO is




A. $792.


B. $1,794.


C. $1,740.


D. $738.


3. A company just starting business made the following four inventory purchases in June:

June 1 150 units $ 390
June 10 200 units 585
June 15 200 units 630
June 28 150 units 510
$2,115

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is


A. $1,290.


B. $825.


C. $1,432.


D. $683.

Lisa D.

In the second problem, you work backwards.
 
Ending inventory would be valued using the cost of the most recent purchases.
 
90 x $8.80 = $792
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11/20/14

Lisa D.

Here is the procedure for the third problem.
 
First, let's figure out Cost of Goods Sold.
 
Beginning inventory  =  0
Purchases                = 700
Ending inventory       = 250
Units sold                 = 450
 
To compute the cost of goods sold (remember, first inventory in is the first to get sold):
 
150 units                      = $390
200 units                      = $585
100 units x ($630/200)  = $315
Cost of Goods sold          $1,290
 
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11/20/14

1 Expert Answer

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Lisa D. answered • 11/20/14

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Here is the procedure for the first problem.
 
First, let's figure out how much product the company sold.
 
Beginning inventory balance = 200
Add: Purchases in January   = 200
Total available for sale        = 400
Less: Ending inventory        = 160
Units sold                           = 240
 
They sold 240 units during January.  In FIFO, the inventory that came in first goes out first.  Therefore, the cost of the units is:
 
200 x $5.00 (cost)         = $1,000
40 x $5.30 (cost)            = $212
Total cost of units sold   = $1,212
 
The total sales value of the products is 240 x $10 = $2,400
 
So gross profit equals $2,400 - $1,212 = $1,188
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Lisa D.

Solving the second problem is much easier.
 
They have 90 units in ending inventory.  In FIFO, the first units in are the first to be sold.  Now you work backwards.
 
90 x $8.80 = $792
 
Another way to compute this is to start with beginning inventory, add purchases and subtract ending inventory to get the units sold.
 
30 + 270 - 90 = 210 units sold
 
In FIFO, the units sold would have been costed out at:
 
30 x $8.00
120 x $8.30
60 x $8.40
 
They would have depleted the beginning inventory, July 8 purchase, and July 17 purchase leaving only the July 25 purchase left in inventory.
Report

11/20/14

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