Comparing cost of goods sold and gross profit---FIFO, LIFO, and Weighted-Average

Question

Comparing cost of goods sold and gross profit---FIFO, LIFO, and Weighted-Average methods

Assume that JR Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1

Beginning merchandise inventory

16 tires @ $65 each

11

Purchase

!0 tires @ $78 each

23

Sale

12 tires @ $90 each

26

Purchase

14 tires @ $80 each

29

Sale

15 tires @ $90 each

May 1

Beginning merchandise inventory

16 tires @ $65 each

11

Purchase

!0 tires @ $78 each

23

Sale

12 tires @ $90 each

26

Purchase

14 tires @ $80 each

29

Sale

15 tires @ $90 each

Explanation / Answer

Cost of goods sold for weighted average method :1,820 / 26 x 12 + 2,100 /28 x 15 = $ 1,965

Date Units Unit cost Total cost May 1 Beginning inventory 16 $65 $1,040 May 11 Purchase 10 78 780 May 23 Sale (12) May 26 Purchase 14 80 1,120 May 29 Sale (15) May 31 Ending inventory 13

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