Three identical units of merchandise were purchased during July, as follows: Dat

Question

Three identical units of merchandise were purchased during July, as follows: Date July 3 10 24 Total Units Product T Purchase Purchase Purchase Cost $31.00 34.00 37.00 $102.00 $34.00 Average cost per unit Assume one unit sells on July 28 for $48.00 Determine the gross profit, cost of merchandise sold, and ending inventory on July 31 using the (a) first-in, first-out, (b) last-in, first-out, and (c) average cost flow methods. Gross Profit Cost of Merchandise Sold Ending Inventory a) First-in, first-out b) Last-in, first-out c) Average

Explanation / Answer

Solution:-

   (a)   

(b)

19unis@14

18units@16

8units@14

18units @16

8units@14

18units@16

13units@15

12units

(8@14 and 4@16)

14units@16

13units@15

Cost of merchandise sold= (11*14) + (8*14) + (4*16) = 330

Ending Inventory= (14*16) + (13*15) = 419

So Option A is Correct

Cost of Merchandise Sold Gross Profit Ending Inventory as on 31 July FIFO 31 48-31=17 71 LIFO 37 48-37=11 65 Average 34 48-34=14 68

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