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 2022. All watches are sold for $503 each.

Jul.		17		Purchased 53 watches for $8,109 ($153 per watch) on account.
Jul.		31		Sold 43 watches for $21,629 cash.
Aug.		12		Purchased 43 watches for $7,009 ($163 per watch) cash.
Aug.		22		Sold 33 watches for $16,599 on account.
Sep.		19		Paid for watches purchased on July 17.
Sep.		27		Receive cash of $10,800 for watches sold on account on August 22.
Oct.		27		Purchased 83 watches for $14,359 ($173 per watch) cash.
Nov.		20		Sold 93 watches for $46,779 cash.
Dec.		4		Purchased 106 watches for $19,398 ($183 per watch) on account.
Dec.		8		Sold 43 watches for $21,629 on account.

A) Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2022, 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

A) Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2022, assuming Suzie uses FIFO to account for inventory.

Calculation of cost of goods available for sale

Date		Unit	Unit cost	Total cost
Jul 17	Purchases	53	$153	$8109
Aug 12	Purchases	43	$43	7009
Oct 27	Purchases	83	$173	14359
Dec 4	Purchases	106	$183	19398
	Total	285		$48875

Sales units= July 31+Aug 22+Nov 20+Dec 8

= 43+33+93+43= 212

Calculation of Cost of goods sold

Date		Unit	Unit cost	Total cost
Jul 17	Purchases	53	$153	$8109
Aug 12	Purchases	43	$43	7009
Oct 27	Purchases	83	$173	14359
Dec 4	Purchases	33	$183	6039
	Total	212		$35516

Ending inventory= Cost of goods available for sale-Cost of goods sold

= $48875-35516= $13359

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

Calculation of Sales

Sales= July 31+Aug 22+Nov 20+Dec 8

= $21629+16599+46779+21629= $106636

Partial Income Statement
For the Year Ended December 31, 2022
Sales	106636
Cost of goods sold	(35516)
Gross profit	$71120