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%3Cp%3EHolliday%20Company\'s%20inventory%20records%20show%20the%20following%20da

ID: 2503806 • Letter: #

Question

%3Cp%3EHolliday%20Company's%20inventory%20records%20show%20the%20following%20data%3A%0AUnits%20Unit%20Cost%20Inventory%2C%20January%201%205%2C000%20%249.00%20Purchases%3A%20June%2018%0A4%2C500%208.00%20November%208%203%2C000%207.00%20A%20physical%20inventory%20on%20December%0A31%20shows%202%2C000%20units%20on%20hand.%20Holliday%20sells%20the%20units%20for%20%2412%0Aeach.%20The%20company%20has%20an%20effective%20tax%20rate%20of%2020%25.%20Holliday%20uses%0Athe%20periodic%20inventory%20method.%20If%20the%20company%20uses%20FIFO%2C%20what%20is%0Athe%20gross%20profit%20for%20the%20period%3F%20Question%2042%20options%3A%201)%20%2421%2C000%202)%0A%2410%2C000%203)%20%242%2C000%204)%20%2438%2C000%3C%2Fp%3E%0A

Explanation / Answer

4)38000

Inventory, January 1 5,000 @ $9.00 = $45,000

Purchases: June 18 4,500 @ $8.00 = $36,000

November 8 3,000 @ $7.00 = $21,000

Sold 10,500 units

A physical inventory on December 31 shows 2,000 units on hand.


Under FIFO method, December 31 inventory is valued at

a. $14,000

2000 units at the latest cost of $7 each = $14,000

COGS = $102,000 - $14,000 = $88,000


What is the cost of goods available for sale?

$102,000


The weighted-average cost per unit is?

$102,000/12,500 units = $8.16


If the company uses FIFO what is the gross profit for the period?

Sales = 10,500 x $12 = $126,000

less COGS $88,000

= Gross Profit $38,000

Tax at 20% = $7,600