Question

Sunland Company uses a periodic inventory system. Details for the inventory account for the month of January 2022 are as follows:

		Units		Per unit price		Total
Balance, 1/1/2022		290		$5.00		$1450
Purchase, 1/15/2022		140		..5.10		714
Purchase, 1/28/2022		140		..5.30		742

An end of the month (1/31/2022) inventory showed that 230 units were on hand. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

$1695

$1705

$3400

$2300

Answer 1

Cost of goods available for sale:

	Units	Per unit price	Total
Balance, 1/1/2022	290	$5.00	$1,450
Purchase, 1/15/2022	140	$5.10	$714
Purchase, 1/28/2022	140	$5.30	$742
	570		$2,906

Calculation of ending inventory
	Units	Per unit price	Total
Purchase, 1/15/2022	90	$5.10	$459
Purchase, 1/28/2022	140	$5.30	$742
	230		$1,201

Cost of ending inventory = $1,201

cost of goods sold = cost of goods available for sale - Cost of ending inventory

=2,906-1,201

= $1,705

Number of units sold = Number of units available for sale - Ending inventory

= 570-230

= 340 units

Sales = Number of units sold x Selling price per unit

= 340 x 10

= $3,400

Gross profit = Sales - Cost of goods sold

= 3,400-1,705

= $1,695

The gross profit for the month= $1,695

First option is correct.

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