Question

Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinic participants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometric pressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watches available for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2019. All watches are sold for $300 each.

Jul.	17	Purchased 50 watches for $7,500 ($150 per watch) on account.
Jul.	31	Sold 40 watches for $12,000 cash.
Aug.	12	Purchased 40 watches for $6,400 ($160 per watch) cash.
Aug.	22	Sold 30 watches for $9,000 on account.
Sep.	19	Paid for watches ordered on July 17.
Sep.	27	Received full payment for watches sold on account on August 22.
Oct.	27	Purchased 80 watches for $13,600 ($170 per watch) cash.
Nov.	20	Sold 90 watches for $27,000 cash.
Dec.	4	Purchased 100 watches for $18,000 ($180 per watch) cash.
Dec.	8	Sold 40 watches for $12,000 on account.

Required:

(a) Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2019, assuming Suzie uses FIFO to account for inventory.

(b) Prepare the gross profit section of a partial income statement for transactions related to MU watches.

Answer 1

CALCULATION OF COST OF ENDING INVENTORY AND COST OF GOODS SOLD UNDER FIFO METHOD
		PURHASES			COST OF GOODS SOLD			CLOSING BALANCE
Date	Particulars	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost	Units (A)	Rate Per unit	Total Cost
July , 17	Purchase	50	$150	$7,500				50	$150	$7,500
July , 31	Sales				40	$150	$6,000	10	$150	$1,500
Aug, 12	Purchase	40	$160	$6,400				10	$150	$1,500
								40	$160	$6,400
Aug, 22	Sales			10	$150	$1,500
				20	$160	$3,200		20	$160	$3,200
Oct, 27	Purchase	80	$170	$13,600				20	$160	$3,200
								80	$170	$13,600
Nov, 20	Sales				20	$160	$3,200
					70	$170	$11,900	10	$170	$1,700
Dec, 04	Purchases	100	$180	$18,000				10	$170	$1,700
								100	$180	$18,000
Dec, 08	Sales				10	$170	$1,700
					30	$180	$5,400	70	$180	$12,600
					480		$28,200.00	70		$12,600.00
	Cost of Ending inventory=	$12,600.00
	Cost o Goods Sold =	$28,200.00
	INCOME STATEMENT (PARTIAL )
	Sales AS on	Amount
	July , 31	$12,000.00
	Aug, 22	$9,000.00
	Nov, 20	$27,000.00
	Dec, 08	$12,000.00
	Total Sales Revenue	$60,000.00
	Less: Cost of Goods Sold	$28,200.00
	Gross Revenue	$31,800.00