Use a perpetual inventory system and a FIFO costing method for ABC Company, a re
ID: 2387833 • Letter: U
Question
Use a perpetual inventory system and a FIFO costing method for ABC Company, a retailer.On July 2, 2007, ABC purchased 100 Reliable tires at $25 each. The purchase was made on account, and the tires were purchased as merchandise inventory.
On July 3, 2007, ABC decided to have an “After the 4th Sale”. Therefore, ABC purchased on account another 300 Reliable tires at $27 each.
On July 5, 2007, ABC sold 160 tires for cash. The sales price for each tire was $50. USE THE FIFO METHOD.
On July 6, 2007, ABC sold 200 tires for cash. The sales price for each tire was $50.
Calculate the following balances after the July 6th sale:
Sales Revenue:
Cost of Merchandise Sold:
Gross Profit:
Number of Reliable Tires in inventory:
Inventory Balance (dollars) for Reliable Tires:
Explanation / Answer
July 2, 2000 purchased 100 tires at $25 July 3, 2007 purchased 300 tires at $27 July 5, 2007 sold 160 tires at $50 (COGS = 100@$25 + 60@$27 = $4,120) July 6, 2007 sold 200 tires at $50 (COGS = 200@$27 = $5,400) Sales Revenue: $18,000 (correct) Cost of Merchandise Sold: $9,520 (correct) Gross Profit: $8,480 (correct) Number of Reliable Tires in inventory: 40 (correct) Inventory Balance (dollars) for Reliable Tires: $1,080 (correct)
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