Question

The Patel Merchandising Corporation began June operations with merchandise inventory of 14 units, each of which cost $130. During June, Patel Merchandising made the following purchases: (1) June 6, 26 units @ $132 per unit, (2) June 15, 28 units @ $136 per unit, (3) June 26, 32 units @ $140 per unit. During June the Company sold the following units at a sales price of $220 per unit: June 8, 18 units, June 20, 24 units, June 29, 30 units. Operating expenses in June were $3,200. The Company estimates its income taxes expense will be approximately 35% of income before taxes.

Using the FIFO inventory method

a) determine the inventory dollar amount on June 1.

b) determine the dollar amount of purchases made in June.

c) determine the cost of goods available for sale during June.

d) determine the cost of goods sold during June.

e) determine the inventory dollar amount on June 30.

f) determine the sales dollar amount for June.

g) determine the gross profit for June.

h) determine the income before taxes for June.

i) determine the income taxes expense for June.

j) determine the net income for June.

Answer 1

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a) determine the inventory dollar amount on June 1.
	14 units*130 per unit	1820
b) determine the dollar amount of purchases made in June.
	Date	Units	Unit Price	Total Price
	Jun 6	26	132	3432
	Jun 15	28	136	3808
	Jun 26	32	140	4480
				11720
c) determine the cost of goods available for sale during June.
	Beginning Inventory	1820
	add: Purchases	11720
	Cost of Goods available for sale	13540
d) determine the cost of goods sold during June.
			Cost of Goods Sold
Sale:	Date	Units	Unit sold from purchase	Per unit Cost	COGS
	Jun 8	18	14	130	1820
			4	132	528
	Jun 20	24	22	132	2904
			2	136	272
	Jun 29	30	26	136	3536
			4	140	560
	Cost of Goods Sold				9620
e) determine the inventory dollar amount on June 30.
	Ending Inventory:
	From Purchase of 26th June	28 Units	140 per unit price	3920
f) determine the sales dollar amount for June.
	Sale Value		15840
	72 Units*220 Per unit price
g) determine the gross profit for June.
	Sale Value	f	15840
	Less: Cost of Goods Sold	d	9620
	Gross Profit		6220
h) determine the income before taxes for June.
	Sale Value	f	15840
	Less: Cost of Goods Sold	d	9620
	Gross Profit		6220
	Less: Operating Expense		3200
	Income Before Tax		3020
i) determine the income taxes expense for June.
	Sale Value	f	15840
	Less: Cost of Goods Sold	d	9620
	Gross Profit		6220
	Less: Operating Expense		3200
	Income Before Tax		3020
	Less: Income Tax 35%		1057
j.	Net Income	3020-1057	1963