ACCOUNTING QUESTION 7 Question based on the below information: The Fairfax Compa

ID: 2531910 • Letter: A

Question

ACCOUNTING QUESTION 7

Question based on the below information:

The Fairfax Company sells blankets for $60 each. The following was taken from the inventory records during May.

DATE PRODUCT Z UNITS COST

May 1 Beginning inv. 0 $0.00

May 3 Purchase 5 $30

May 10 Sale 3

May 17 Purchase 10 $34

May 20 Sale 6

May 23 Sale 3

May 30 Purchase 10 $40

Assuming the company uses the perpetual inventory system;

A) determine the ending inventory for the month of May using the FIFO inventory cost method.

Answer Choices: $264, $502, $400, $790

B) determine the cost of merchandise sold for the sale of May 20 using the LIFO inventory cost method.

Answer Choices: $124, $196, $204, $240

C) determine the gross profit for the sale of May 23 using the FIFO inventory cost method.

Answer Choices: $78, $90, $102, $180

a) Ending inventory under FIFO inventory cost method :

Ending inventory = (10*40+3*34) = 502

so answer is b) $502

b) Cost of merchandise sold under LIFO method:

Cost of merchandise sold = 6*34 = 204

so answer is c) 204

c) Gross profit on sale of may 23 under FIFO :

Gross profit = (60-34)*3 = 78

so answer is a) $78

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