EXERCISE 4 The Breeze tradin g company discloses the following information for t

Question

EXERCISE 4 The Breeze tradin g company discloses the following information for the month of August 2013. Aug. 01 Beginning inventory:900 units@ $5 each Aug. 10 Sales: Aug. 11 Purchases: Aug. 15 Sales: Aug. 20 Purchases: Aug. 27 Sales: Required: 500 units @ $12 each 1,800 units @$6 1000 units 12.50 1000 units $6.50 700 units $13.50 Assume the Breeze trading company uses periodic inventory system, compute cost of goods sold (COGs), ending inventory and gross profit under: (a). FIFO (b). LIFO EXERCISE 5 Let' s assume we need to estimate the cost of the July 31 inventory. The last time the merchandise inve ntory was counted was seven months earlier on December 31 and it had a cost of $25,000. Since December 31, the company purchased merchandise with a cost of $142,000; its sales were $50,000, and the gross profit percentage has remained at 20%. Freight Cost on Purchases $25,000.Required estimate the July 31 by gross profit method:

Explanation / Answer

Compute cost of goods sold, ending inventory and gross profit under following method :

Calculate ending inventory under gross profit method :

Cost of goods available for sales = Beginning inventory+purchase+freight

= 25000+142000+25000

Cost of goods available for sale = 192000

Cost of goods sold = 50000-(50000*20%) = 40000

Cost of july 13 inventory = (192000-40000) = 152000

FIFO LIFO Ending inventory 1000*6.5+500*6=9500 900*5+600*6=8100 Cost of goods sold 900*5+1300*6=12300 1000*6.5+1200*6=13700 Sales 27950 27950 Gross profit 15650 14250

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