Question

Refer to the information in Problem 5-1A and assume the periodic inventory system is used. Required

4. Compute gross profit earned by the company for each of the four costing methods in part 3.

Short answer

FIFO	$19,100
LIFO	$17,000
Weighted average	$17,940
Specific Identification method	$18,360

Step-by-step solution

Definition of Net Profit

The profit calculated after making a deduction for all indirect expenses from the gross profit is known as net profit. It is reported in the last line of the income statement.

Computation of Gross profit

Computation of cost of goods sold:

Particular	FIFO	LIFO	Weighted average	Specific Identification
Cost of goods available for sale	$46,600	$46,600	$46,600	$46,600
Less: Ending inventory	(14,800)	(12,700)	(13,640)	(14,060)
Cost of goods sold	$31,800	$33,900	$32,960	$32,540

Calculation of gross profit:

Particular	FIFO	LIFO	Weighted average	Specific Identification
Sales	$50,900	$50,900	$50,900	$50,900
Less: Cost of goods sold	($31,800)	($33,900)	($32,960)	($32,540)
Gross profit	$19,100	$17,000	$17,940	$18,360