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In: Accounting

Compute ending inventory, cost of goods sold, and gross profit.

My question: Assume the company uses three inventory pools instead of one. Compute ending inventory, cost of goods sold, and gross profit. (Round price index to 2 decimal places, e.g. 1.45 and final answers to 0 decimal places, e.g. 6,548.)

 

William’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2020, William adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of:

Category

 

Quantity

 

Cost per Unit

 

Total Cost

Portable   5,400   $ 100   $  540,000
Midsize   7,200   250   1,800,000
Flat-screen   2,700   400   1,080,000
    15,300       $ 3,420,000


During 2020, the company had the following purchases and sales.

Category

 

Quantity
Purchased

 

Cost per Unit

 

Quantity
Sold

 

Selling Price
per Unit

Portable   13,500   $ 110   12,600   $ 150
Midsize   18,000   300   21,600   400
Flat-screen   9,000   500   5,400   600
    40,500       39,600  

 

(b)

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Your answer is incorrect.

Assume the company uses three inventory pools instead of one. Compute ending inventory, cost of goods sold, and gross profit. (Round price index to 2 decimal places, e.g. 1.45 and final answers to 0 decimal places, e.g. 6,548.)

Ending inventory  

$

Cost of goods sold  

$

Gross profit  

$

Solutions

Expert Solution

Calculation of Ending Inventory:

Value of closing stock of Portable = =(5400*100)+(13500-12600)*110=$6,39,000

Value of closing stock of Mid-size=3600*250=$9,00,000

Value of closing stock of Flat screen = 2700*400+(9000-5400)*500 = $28,80,000.

  Opening stock Purchases Sales Closing Stock Value of Closing Stock
Portable 5400 13500 12600 6300 639000
Mid size 7200 18000 21600 3600 900000
Flat Screen 2700 9000 5400 6300 2880000

 

Calculation of Cost of goods sold :

Cost of goods sold = Opening stock + Purchases -Closing Stock

    Opening stock($) Purchases($) Closing Stock($) Cost of goods sold($)
  Portable 540000 1485000 639000 1386000
  Mid size 1800000 5400000 900000 6300000
  Flat Screen 1080000 4500000 2880000 2700000

 

Calculation of Gross profit:

  Sales Value (1) Cost of goods sold (2) Gross Profit (1-2)
Portable 1890000 1386000 $504000
Mid size 8640000 6300000 $2340000
Flat Screen 3240000 2700000 $540000

              Gross profit 

Portable                   $504000

Mid size                    $2340000

Flat Screen               $540000

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