Question

Required information

Problem 6-2B Calculate ending inventory, cost of goods sold, sales revenue, and gross profit for four inventory methods (LO6-3, 6-4, 6-5)

[The following information applies to the questions displayed below.]

Pete’s Tennis Shop has the following transactions related to its top-selling Wilson tennis racket for the month of August. Pete’s Tennis Shop uses a periodic inventory system.

Date			Transactions	Units	Unit Cost					Total Cost
August	1		Beginning inventory	8		$	156				$	1,248
August	4		Sale ($205 each)	5
August	11		Purchase	10			146					1,460
August	13		Sale ($220 each)	8
August	20		Purchase	10			136					1,360
August	26		Sale ($230 each)	11
August	29		Purchase	12			126					1,512
											$	5,580

For the specific identification method, the August 4 sale consists of rackets from beginning inventory, the August 13 sale consists of rackets from the August 11 purchase, and the August 26 sale consists of one racket from beginning inventory and 10 rackets from the August 20 purchase.

rev: 10_13_2016_QC_CS-65854

Problem 6-2B Part 2

2. Using FIFO, calculate ending inventory and cost of goods sold at August 31.  

Answer 1

FIFO: Under the FIFO method, it is assumed that the goods purchased first are the goods sold first. So the ending inventory would represent the goods purchased later in point of time.
LIFO: Under the LIFO method, it is assumed that the goods purchased last are the goods sold first. So the ending inventory would represent the goods which are purchased first in point of time.
Average cost: Under the average cost method, average cost per unit is found for units available for sale and the average cost arrived is used to calculate ending inventory and cost of goods sold.