Question

Exercise World began January with merchandise inventory of 90 crates of vitamins that cost a total of \(5,850. During the month, Exercise World purchased and soldmerchandise on account as follows:

Jan. 2 Purchase 130 crates @ \) 76 each

5 Sale 140 crates @ \( 100 each

16 Purchase 170 crates @ \) 86 each

27 Sale 180 crates @ $ 104 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: $24,330

Ending Inventory: $6,020

Gross Profit: $8,390

Step-by-step solution

Perpetual inventory table under the FIFO method

Computation of gross profit

$$\begin{gathered} \mathbf{Total}\mathbf{}\mathbf{Revenue}\mathbf{=}\mathbf{Sale}\mathbf{}\mathbf{Value}\mathbf{}\mathbf{of}\mathbf{}\mathbf{5}\mathbf{th}\mathbf{}\mathbf{Jan}\mathbf{+}\mathbf{Sale}\mathbf{}\mathbf{Value}\mathbf{}\mathbf{of}\mathbf{}\mathbf{27}\mathbf{th}\mathbf{}\mathbf{Jan} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{(}\mathbf{140}\mathbf{\times }\mathbf{\$}\mathbf{100}\mathbf{)}\mathbf{+}\mathbf{(}\mathbf{180}\mathbf{\times }\mathbf{\$}\mathbf{104}\mathbf{)} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{14}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{18}\mathbf{,}\mathbf{720} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{32}\mathbf{,}\mathbf{720} \\ \mathbf{Gross}\mathbf{}\mathbf{Profit}\mathbf{=}\mathbf{Total}\mathbf{}\mathbf{Revenue}\mathbf{‐}\mathbf{Cost}\mathbf{}\mathbf{of}\mathbf{}\mathbf{goods}\mathbf{}\mathbf{sold} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{32}\mathbf{,}\mathbf{720}\mathbf{‐}\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{330} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{8}\mathbf{,}\mathbf{390} \end{gathered}$$