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 $501 each. Jul. 17 Purchased 51 watches for $7,701 ($151 per watch) on account. Jul. 31 Sold 41 watches for $20,541 cash. Aug. 12 Purchased 41 watches for $6,601 ($161 per watch) cash. Aug. 22 Sold 31 watches for $15,531 on account. Sep. 19 Paid for watches purchased on July 17. Sep. 27 Receive cash of $9,600 for watches sold on account on August 22. Oct. 27 Purchased 81 watches for $13,851 ($171 per watch) cash. Nov. 20 Sold 91 watches for $45,591 cash. Dec. 4 Purchased 102 watches for $18,462 ($181 per watch) on account. Dec. 8 Sold 41 watches for $20,541 on account. Required: 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. 1-b. Prepare the gross profit section of a partial income statement for transactions related to MU watches.

Required:

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.

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

Answer 1

Answer to 1 - a

Sales Revenue
Date of Sale	No. of Pieces	Rate p.u.	Total Sale
31-Jul	41	$             501.00	$              20,541.00
22-Aug	31	$             501.00	$              15,531.00
20-Nov	91	$             501.00	$              45,591.00
8-Dec	41	$             501.00	$              20,541.00
	204	Total    =	$            102,204.00

Purchases
Date of Purchase	No. of Pieces	Rate p.u.	Total Purchase
17-Jul	51	$             151.00	$                7,701.00
12-Aug	41	$             161.00	$                6,601.00
27-Oct	81	$             171.00	$              13,851.00
4-Dec	102	$             181.00	$              18,462.00
	275	Total    =	$              46,615.00

Inventory Account
Date	Inventory In	Cost Price p.u.	Inventory Out	Cost Price p.u.	Closing Inventory	Cost Price p.u.	Total Value
17-Jul	51	$             151.00	-	$                      -	51	$             151.00	$           7,701.00
31-Jul	-	$                      -	41	$             151.00	10	$             151.00	$           1,510.00
12-Aug	41	$             161.00	-	$                      -	10	$             151.00	$           1,510.00
12-Aug	-	$                      -	-	$                      -	41	$             161.00	$           6,601.00
22-Aug	-	$                      -	10	$             151.00	-	$                      -	$                        -
22-Aug	-	$                      -	21	$             161.00	20	$             161.00	$           3,220.00
27-Oct	81	$             171.00	-	$                      -	20	$             161.00	$           3,220.00
27-Oct	-	$                      -	-	$                      -	81	$             171.00	$         13,851.00
20-Nov	-	$                      -	20	$             161.00	-	$                      -	$                        -
20-Nov	-	$                      -	71	$             171.00	10	$             171.00	$           1,710.00
4-Dec	102	$             181.00	-	$                      -	10	$             171.00	$           1,710.00
4-Dec	-	$                      -	-	$                      -	102	$             181.00	$         18,462.00
8-Dec	-	$                      -	10	$             171.00	-	$                      -	$                        -
8-Dec	-	$                      -	31	$             181.00	71	$             181.00	$         12,851.00

Therefore :

1. Sales = $ 102,204

2. Cost of Goods Sold = Purchases - Ending Inventory = $ 46,615 - 12,851 = $ 33,764

3. Ending Inventory = $ 12,851

Answer to 1 - b

In the books of Suzie
Partial Income Statement (MU Watches)
For the HY ended 31-Dec-2022
Particulars		Amount in $
Sales Revenue		$     102,204.00
Less: Cost of Goods Sold		$     (33,764.00)
Gross Profit		$       68,440.00