Question

The Boxwood Company sells blankets for $35 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.

Date	Blankets	Units	Cost
May 3	Purchase	40	$18
10	Sale	16
17	Purchase	39	$20
20	Sale	28
23	Sale	4
30	Purchase	31	$21

Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method.

a. $60

Answer 1

Calculation of Gross profit for may 23 sale
Sales	140	(35*4)
Less: Cost of Goods sold	80.00	(See below inventory table)
Gross profit	60.00
FIFO
	Goods Purchased	Cost of Goods sold	Closing Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
May-03	40.00	18.00	720.00				40.00	18.00	720.00
May-10				16.00	18.00	288.00	24.00	18.00	432.00
May-17	39.00	20.00	780.00				24.00	18.00	432.00
							39.00	20.00	780.00
May-20				24.00	18.00	432.00	35.00	20.00	700.00
				4.00	20.00	80.00
May-23				4.00	20.00	80.00	31.00	20.00	620.00
May-30	31.00	21.00	651.00				31.00	20.00	620.00
							31.00	21.00	651.00
Total	110.00		2,151.00	48.00		880.00	62.00		1,271.00
Note: Under perpetual, its better to prepare above table to determine exact flow of inventory.