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Q 20E-1

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 363

Short Answer

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ $ 65 each

11 Purchase 10 tires @ $ 78 each

23 Sale 12 tires @ $ 88 each

26 Purchase 14 tires @ $ 80 each

29 Sale 18 tires @ $ 88 each

Requirements

1. Compute cost of goods sold and gross profit using the FIFO inventory costing method.

Cost of goods sold: $2,140

Gross Profit: $500

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep 1: Computation of cost of goods sold using FIFO

DatePurchase/openingSalesBalance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount

May1

16

$65

$1,040

16

$65

$1,040

11

10

$78

$780

16

10

$65

$78

$1,820

23

12

$65

$780

4

10

$65

$78

$1,040

26

14

$80

$1,120

4

10

14

$65

$78

$80

$2,160

29

4

10

4

$65

$78

$80

$1,360

10

$80

$800

Total

40

$2,940

30

$2,140

10

$80

$800

Step 2: Calculation of gross profit

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