Question

In: Accounting

You have the following information for Sunland Company. Sunland uses the periodic method of accounting for...

You have the following information for Sunland Company. Sunland uses the periodic method of accounting for its inventory transactions. Sunland only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

March 1 Beginning inventory 150 diamonds at a cost of $300 per diamond.
March 3 Purchased 200 diamonds at a cost of $340 each.
March 5 Sold 170 diamonds for $630 each.
March 10 Purchased 345 diamonds at a cost of $365 each.
March 25 Sold 385 diamonds for $680 each.

Assume that Sunland uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?


Cost of goods sold ?

Gross profit ?

Assume that Sunland uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?

Cost of goods sold ?

Gross profit ?

Solutions

Expert Solution

STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC FIFO METHOD
RECIEPTS COST OF GOODS SOLD BALANCE
DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $
01-Mar 150 300 45000 150 300 45000
Purchasse
03-Mar 200 340 68000 200 340 68000
10-Mar 345 365 125925 205 365 74825 140 365 51100
TOTAL 695 238925 555 187825 140 51100
STATEMENT SHOWING INVENTORY RECORD UNDER PERIODIC LIFO METHOD
RECIEPTS COST OF GOODS SOLD BALANCE
DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $
01-Mar 150 300 45000 10 300 3000 140 300 42000
Purchasse
03-Mar 200 340 68000 200 340 68000
10-Mar 345 365 125925 345 365 125925
TOTAL 695 238925 555 196925 140 42000
Req 1.
Cost of goods sold as per FIFO: 187825
Gross Profit as per FIFO:
Sales revenue (170*630+385*680) 368900
Less: Cost of good ssold 1,87,825
Gross Profit as per FIFO: 1,81,075
Req2.
Cost of goods sold as per LIFO: 196925
Gross Profit as per LIFO:
Sales revenue (170*630+385*680) 368900
Less: Cost of good ssold 1,96,925
Gross Profit as per LIFO: 1,71,975

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