Comprehensive The following information for 2016 is available for Marino Company

Question

Comprehensive

The following information for 2016 is available for Marino Company:

The beginning inventory is $95000.

Purchases returns of $6000 were made.

Purchases of $288000 were made on terms of 1/10, n/30. Eighty percent of the discounts were taken.

At December 31, purchases of $16000 were in transit, FOB destination, on terms of 1/10, n/30.

The company made sales of $644000. The gross selling price per unit is twice the net cost of each unit sold.

Sales allowances of $7000 were made.

The company uses the LIFO periodic method and the gross method for purchase discounts.

Required:

Compute the cost of the ending inventory before the physical inventory is taken. Ignore Sales allowances in your computations.
$

Compute the amount of the cost of goods sold that came from the purchases of the period and the amount that came from the beginning inventory.

Cost of sales from purchases $ Cost of sales from beginning inventory Total cost of goods sold $

Explanation / Answer

SOLUTION

(A) Schedule for Computation of Ending Inventory

Sales = $644,000

Cost of goods sold = $644,000 / 2 = $322,000

Ending Inventory = Beginning Inventory + Purchases (net) - Cost of Goods Sold

= $95,000 + $279,744 - $322,000

= $52,744

(B) Sales from net purchases of period = $279,744 * 2 = $559,488

Sales from beginning inventory = $644,000 - $559,488 = $84,512

Cost of sales from beginning inventory = $84,512 / 2 = $42,256

Amount ($) Amount ($) Beginning inventory 95,000 Purchases 288,000 Less:Purchases returns (6,000) 282,000 Less: Purchases discounts taken ($282,000*1%*80%) (2,256) Net purchases 279,744

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