TsIzzWe (Ts) is a company that purchases T shirts from the manufacturer, Frootyl
ID: 2422712 • Letter: T
Question
TsIzzWe (Ts) is a company that purchases T shirts from the manufacturer, Frootyluums (Frooty) and sells them to college students through the college bookstore, Rskoolstore (RSkool). Ts has hired you to be the accountant for the company.
Ts had used the periodic inventory system prior to switching to the perpetual inventory system. Using the data provided for transactions that occurred during that time, determine the Gross Profit for that period using the Average Cost Inventory Flow Method.
Ts sold Long Sleeve Blue Shirts for $7.50
Ts sold Short Sleeve Blue Shirts for $6.50
May 1: Inventory Balance: Long Sleeve (LS)Blue Shirts: 180 @ $3
Inventory Balance: Short Sleeve (SS) Blue Shirts: 55 @ $2
May 5 Purchase: 40 LS Blue @ 3.50
May 5 Purchase: 25 SS Blue @ 2.25
May 9 Purchase: 100 LS Blue @ 3.70
May 13 Purchase: 300 SS Blue @ 2.40
May 15 Purchase: 200 SS Blue @ 2.42
May 20 Purchase: 50 SS Blue @ 2.45
May 24 Purchase: 144 SS Blue @ 2.50
May 27 Purchase: 300 SS Blue @ 2.52
May 30 Purchase: 250 LS Blue @ 4.00
May 30: Inventory Balance: Long Sleeve Blue Shirts: 195
Inventory Balance: Short Sleeve Blue Shirts: 124
Explanation / Answer
Under perpetual inventory system, the company will record the inventory at the end of regular interval.
The inventory balance
2534
Average p.u= 3.29
Ending inventory = 3.29* 195 =
Long Sleeves Opening balance 180 3 540 40 3.5 140 100 3.7 370 200 2.42 484 250 4 1000 Total 7702534
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