Eight Company reported 1,500 units of inventory at a total cost of $15,000 as of
ID: 2406239 • Letter: E
Question
Eight Company reported 1,500 units of inventory at a total cost of $15,000 as of November 1, 2018. The following transactions occurred during the month.
November 14: The company purchased 2,000 units of merchandise on account for $22,000 with terms 2/10, n30. The goods were shipped f.o.b. destination and arrived at the company's warehouse on November 18. The company paid $500 cash to a third party carrier for freight.
November 18: The company received the inventory purchased on November 14.
November 19: The company returned 300 units of merchandise purchased on November 14 for credit.
November 20: The company sold 1,400 units of merchandise on account for $28,000 with terms 2/10, n30. The goods shipped f.o.b. shipping point and arrived at the customer's warehouse on November 24.
November 22: The company paid for the merchandise purchased on November 14.
November 24: The customer confirmed receipt of the merchandise shipped on November 20.
Assume that Eight Company uses the periodic method and last-in, first-out (LIFO) cost flow assumption to account for inventory, the gross method to account for purchase discounts, and the gross method to account for sales discounts.
What is the cost of goods sold for the month ending November 30, 2018?
Explanation / Answer
As the company uses the periodic method and last-in, first-out (LIFO) cost flow assumption to account for inventory, the gross method to account for purchase discounts, cost of goods sold on November 20 (1,400 units) will be equal to cost of gross purchase cost of goods purchased on November 14.
Cost of goods sold for the month = $22,000/2,000 units*1,400 units
= $15,400
Therefore the cost of goods sold for the month ending November 30, 2018 is $15,400.
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