Question

Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of \(4,290. During the month, Fit Gym purchased and sold merchandise on account as follows:

Jan. 5 Purchase 156 crates @ \) 64 each

13 Sale 180 crates @ \( 100 each

18 Purchase 114 crates @ \) 75 each

26 Sale 150 crates @ $ 116 each

Requirements

1. Prepare a perpetual inventory record, using the FIFO inventory costing method, and determine the company’s cost of goods sold, ending merchandise inventory, and gross profit.

Short answer

Cost of goods sold: $21,471

Ending Inventory: $1,350

Gross Profit: $13,929

Step-by-step solution

Step-by-Step Solution

Step 1: Perpetual inventory table under the FIFO method

	Purchases			Cost of goods sold			Inventory on hand
Date	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit Cost	Total Cost
Jan 1.							78	$55	$4,290
Jan 5.	156	$64	$9,984				78 156	$55 $64	$14,274
Jan 13				78 102	$55 $64	$10,815	54	$64	$3,456
Jan 18	114	$75	$8,550				54 114	$64 $75	$12,006
Jan 26				54 96	$64 $75	$10,656	18	$75	$1,350
Total	270		$18,534	330		$21,471	18	$75	$1,350

Computation of gross profit

$$\begin{gathered} \mathrm{Total}\mathrm{Revenue}=\mathrm{Sale}\mathrm{value}\mathrm{of}13\mathrm{th}\mathrm{January}+\mathrm{Sale}\mathrm{value}\mathrm{of}26\mathrm{th}\mathrm{January} \\ =\left(180\times \$100\right)+\left(150\times \$116\right) \\ =\$18,000+\$17,400 \\ =\$35,400 \end{gathered}$$

$$\begin{gathered} \mathrm{Gross}\mathrm{Profit}=\mathrm{Total}\mathrm{Revenue}-\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold} \\ =\$35,400-\$21,471 \\ =\$13,929 \end{gathered}$$