In: Accounting
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 | $ | 145 | $ | 1,160 | ||||||||
August | 4 | Sale ($150 each) | 5 | ||||||||||||
August | 11 | Purchase | 10 | 135 | 1,350 | ||||||||||
August | 13 | Sale ($165 each) | 8 | ||||||||||||
August | 20 | Purchase | 10 | 125 | 1,250 | ||||||||||
August | 26 | Sale ($175 each) | 11 | ||||||||||||
August | 29 | Purchase | 12 | 115 | 1,380 | ||||||||||
$ | 5,140 | ||||||||||||||
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.)
6. Comparing FIFO and LIFO, which one provides the more meaningful measure of ending inventory?
7. If Pete’s chooses to report inventory using LIFO, record the LIFO adjustment. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
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Pete’s Tennis Shop | |||
Answer 1 | |||
Periodic Specific Identification | No. of Units | Cost per unit | Total |
Beginning Inventory | 8.00 | 145.00 | 1,160.00 |
Purchased on Aug 11 | 10.00 | 135.00 | 1,350.00 |
Purchased on Aug 20 | 10.00 | 125.00 | 1,250.00 |
Purchased on Aug 29 | 12.00 | 115.00 | 1,380.00 |
Goods available for sale | 40.00 | 5,140.00 | |
Cost of Goods sold | |||
From Beginning Inventory | 6.00 | 145.00 | 870.00 |
From units Purchased Aug 11 | 8.00 | 135.00 | 1,080.00 |
From units Purchased on Aug 20 | 10.00 | 125.00 | 1,250.00 |
Total Cost of Goods sold | 24.00 | 3,200.00 | |
Ending Inventory | 16.00 | 1,940.00 | |
Answer 2 | |||
Periodic FIFO | No. of Units | Cost per unit | Total |
Beginning Inventory | 8.00 | 145.00 | 1,160.00 |
Purchased on Aug 11 | 10.00 | 135.00 | 1,350.00 |
Purchased on Aug 20 | 10.00 | 125.00 | 1,250.00 |
Purchased on Aug 29 | 12.00 | 115.00 | 1,380.00 |
Goods available for sale | 40.00 | 5,140.00 | |
Cost of Goods sold | |||
From Beginning Inventory | 8.00 | 145.00 | 1,160.00 |
From units Purchased Aug 11 | 10.00 | 135.00 | 1,350.00 |
From units Purchased on Aug 20 | 6.00 | 125.00 | 750.00 |
Total Cost of Goods sold | 24.00 | 3,260.00 | |
Ending Inventory | 16.00 | 1,880.00 | |
Answer 3 | |||
Periodic LIFO | No. of Units | Cost per unit | Total |
Beginning Inventory | 8.00 | 145.00 | 1,160.00 |
Purchased on Aug 11 | 10.00 | 135.00 | 1,350.00 |
Purchased on Aug 20 | 10.00 | 125.00 | 1,250.00 |
Purchased on Aug 29 | 12.00 | 115.00 | 1,380.00 |
Goods available for sale | 40.00 | 5,140.00 | |
Cost of Goods sold | |||
From units Purchased on Aug 29 | 12.00 | 115.00 | 1,380.00 |
From units Purchased on Aug 20 | 10.00 | 125.00 | 1,250.00 |
From units Purchased on Aug 11 | 2.00 | 135.00 | 270.00 |
Total Cost of Goods sold | 24.00 | 2,900.00 | |
Ending Inventory | 16.00 | 2,240.00 | |
Answer 4 | |||
Periodic Weighted Average | No. of Units | Cost per unit | Total |
Beginning Inventory | 8.00 | 145.00 | 1,160.00 |
Purchased on Aug 11 | 10.00 | 135.00 | 1,350.00 |
Purchased on Aug 20 | 10.00 | 125.00 | 1,250.00 |
Purchased on Aug 29 | 12.00 | 115.00 | 1,380.00 |
Goods available for sale | 40.00 | 128.50 | 5,140.00 |
Cost of Goods sold | 24.00 | 3,084.00 | |
Ending Inventory | 16.00 | 2,056.00 | |
Workings for Answer 5 | |||
Calculation of sales value | No. of Units | Sell Price | Total |
Aug 4 | 5.00 | 150.00 | 750.00 |
Aug 13 | 8.00 | 165.00 | 1,320.00 |
Aug 26 | 11.00 | 175.00 | 1,925.00 |
Total | 24.00 | 3,995.00 | |
Answer 5 | Specific | FIFO | LIFO | Weighted Average |
Sales | 3,995.00 | 3,995.00 | 3,995.00 | 3,995.00 |
Less: Cost of goods sold | 3,200.00 |
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