Question

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		$	141				$	1,128
August	4		Sale ($130 each)	5
August	11		Purchase	10			131					1,310
August	13		Sale ($145 each)	8
August	20		Purchase	10			121					1,210
August	26		Sale ($155 each)	11
August	29		Purchase	11			111					1,221
											$	4,869

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.

5. Calculate sales revenue and gross profit under each of the four methods. (Round weighted-average cost amounts to 2 decimal places.)

Answer 1

		Cost of Goods Available for sale
Date	Activity	Units	Unit Price	Amount
Aug-01	Beginning Inventory	8	$          141.00	$      1,128.00
Aug-11	Purchase	10	$          131.00	$      1,310.00
Aug-20	Purchase	10	$          121.00	$      1,210.00
Aug-29	Purchase	11	$          111.00	$      1,221.00
	Total	39		$      4,869.00

		Sales Revenue
Date	Activity	Units	Unit Price	Amount
Aug-04	Sales	5	$          130.00	$          650.00
Aug-13	Sales	8	$          145.00	$      1,160.00
Aug-26	Sales	11	$          155.00	$      1,705.00
	Total	24		$      3,515.00

Sales Revenue will be same under every method

FIFO
Under FIFO method, units purchased first are sold first

		Cost of Goods Sold
Date	Activity	Units	Unit Price	Amount
Aug-01	Beginning Inventory	8	$          141.00	$      1,128.00
Aug-11	Purchase	10	$          131.00	$      1,310.00
Aug-20	Purchase	6	$          121.00	$          726.00
	Total	24		$      3,164.00

Gross Profit = Sales Revenue - Cost of Goods Sold
= $3515 - $3164 = $351

LIFO
Under LIFO method, goods purchased last are sold first

		Cost of Goods Sold
Date	Activity	Units	Unit Price	Amount
Aug-29	Purchase	11	$          111.00	$      1,221.00
Aug-20	Purchase	10	$          121.00	$      1,210.00
Aug-11	Purchase	3	$          131.00	$          393.00
	Total	24		$      2,824.00

Gross Profit = Sales Revenue - Cost of Goods Sold
= $3515 - $2824 = $691

Specific Identification

		Cost of Goods Sold
Date	Activity	Units	Unit Price	Amount
Aug-01	Beginning Inventory	6	$          141.00	$          846.00
Aug-11	Purchase	8	$          131.00	$      1,048.00
Aug-20	Purchase	10	$          121.00	$      1,210.00
	Total	24		$      3,104.00

Gross Profit = Sales Revenue - Cost of Goods Sold
= $3515 - $3104 = $411

Weighted Average
Average Cost per unit = $4869 / 39 = $124.85

Cost of Goods Sold = 24 x $124.85 = $2996
Gross Profit = Sales Revenue - Cost of Goods Sold
= $3515 - $2996 = $519