Question

Refer to the information in Problem 5-3B 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	$475,500
LIFO	$449,200
Weighted Average	$460,023.50
Specific Identification	$461,200

Step-by-step solution

Definition of Gross Earnings

The earnings representing the total income earned during the period are known as gross earnings. Such earnings are not adjusted against any deduction.

Calculation of gross profit

Calculation of Cost of goods sold:

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Cost of goods available for sale	$249,300	$249,300	$249,300	$249,300
Less: Ending Inventory	(88,800)	(62,500)	(73,323.5)	(74,500)
Cost of goods sold	$160,500	$186,800	$175,976.50	$174,800

Calculation of Gross Profit:

Particular	FIFO	LIFO	Weighted Average	Specific Identification
Sales	$636,000	$636,000	$636,000	$636,000
Less: Cost of goods sold	(160,500)	(186,800)	(175,976.50)	(174,800)
Gross profit	$475,500	$449,200	$460,023.50	$461,200