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.

b. For what amount would MU inventory be reported in the December 31, 2022, balance sheet?

c. Prepare an updated gross profit section of a partial income statement accounting for this additional information.

Answer 1

Perpetual FIFO
	Cost of goods available for sale	Cost of goods sold, Jul 31	Cost of goods sold, Aug 22	Cost of goods sold, Nov, 20	Cost of goods sold, Dec, 8	Inventory Balance
Purchaases	# of units	Cost per unit	Cost of goods sold available	# of units	Cost per unit	Cost of goods sold	# of units	Cost per unit	Cost of goods sold	# of units	Cost per unit	Cost of goods sold	# of units	Cost per unit	Cost of goods sold	# of units	Cost per unit	Ending inventory
July, 17	51	151	7701	41	151	6191	10	151	1510			0			0	0		0
Aug, 12	41	161	6601				21	161	3381	20	161	3220			0	0		0
Oct, 27	81	171	13851							71	171	12141	10	171	1710	0		0
Dec, 4	102	181	18462										31	181	5611	71	181	12851
Total	275		46615	41		6191	31		4891	91		15361	41		7321	71		12851

	Using FOFO method
	Closing stock	Units	Amoutn
		71	12851
	Total cost of goods sold	=(6191+4891+15361+7321)
			33764
	Updated gross profit section
			Amount
	Sales	(204*501)	102204
Less	CoGS		33764
	Gross profit		68440