The following information is taken from the records of the Owen DeBanks Company.

Question

The following information is taken from the records of the Owen DeBanks Company. Owen DeBanks Company uses a Perpetual inventory system a. Determine the cost of goods sold for the month using the LIFO cost flow assumption. b. How many units are in ending inventory and what is the cost of ending inventory under each assumption? What is the cost of goods available for sale under each assumption? Show the Income Statement presentation for the month of Sales and COGS. Each unit sells for $8 each. c. d. e. Assuming DeBanks sells each unit for $8 each, what is the gross profit of the 7/21 sale? # Cost Units Unit Date Transaction 7/1 Beginning Inventory 714 Sale 7/12 Purchase 7/16 Sale 7/21 Sale 7/25 Purchase 7/31 Sale 26 10 12 10 5.50 6.00 6.15 9 15 Inventory Cost of Goods Sold a. b. Ending Inventory: Units SEI d. Income Statement: Sales (COGS Expense) Gross Profit Sales COGS Expense) Gross Profit e. 7/21 Sale:

Explanation / Answer

a. Cost of goods Sold for Month using LIFO method = ( 55 + 60 + 45 + 88.35) = 248.35 (refer table above)

b. 4 unit are remaining in end balance on 31st July @ cost 5.50 /unit (refer table above)

c. Cost of good available for good is 22 ( 4 unit * 5.50) (refer table above)

d. Cost of Goods Sold = Beginning Inventory + Purchase - End Inventory = (143 + 127.35 - 22) = 248.35

Date Beginning Balance Purchase Sale End Balance 01-Jul 26 unit * 5.50    143.00                            -                           -   26 unit * 5.50      143.00 04-Jul 26 unit * 5.50    143.00                            -   10 unit * 5.50      55.00 16 unit * 5.50         88.00 12-Jul 16 unit * 5.50      88.00 12 unit * 6      72.00                         -   16 unit * 5.50 + 12 unit * 6      160.00 16-Jul 16 unit * 5.50 + 12 unit * 6    160.00 10 unit * 6      60.00 16 unit * 5.50 + 2 unit * 6      100.00 21-Jul 16 unit * 5.50 + 2 unit * 6    100.00 2 unit * 6 + 6 unit * 5.50      45.00 10 unit * 5.50           55.00 25-Jul 10 unit * 5.50        55.00 9 unit * 6.15      55.35 10 unit * 5.50 + 9 unit * 6.15      110.35 31-Jul 10 unit * 5.50 + 9 unit * 6.15    110.35 9 unit * 6.15 + 6 unit *5.50      88.35 4 unit * 5.50         22.00    127.35    248.35

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