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Problem 6-2B Calculate ending inventory, cost of goods sold, sales revenue, and gross profit for four inventory methods (LO6-3, 6-4, 6-5)

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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		$	152				$	1,216
August	4		Sale ($185 each)	5
August	11		Purchase	10			142					1,420
August	13		Sale ($200 each)	8
August	20		Purchase	10			132					1,320
August	26		Sale ($210 each)	11
August	29		Purchase	10			122					1,220
											$	5,176

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.

Answer 1

Answer to Part 1.

Units available for Sale = Beginning Inventory + Units purchased

Units Purchased = 10 + 10 + 10 = 30 Units

Units available for Sale = 8 + 30
Units available for Sale = 38 Units

Units sold = 5 + 8 + 11 = 24 units

FIFO Method:

Cost of Goods sold = (8 * $152) + (10 * $142) + (6 * $132)
Cost of Goods sold = $1,216 + $1,420 + $792
Cost of Goods sold = $3,428

Cost of Ending Inventory = Cost of Goods Sold - Cost of Goods sold
Cost of Ending Inventory = $5,176 - $3,428
Cost of Ending Inventory = $1,748

Sales Revenue = (5 * $185) + (8 * $200) + (11 * $210)
Sales Revenue = $925 + $1,600 + $2,310
Sales Revenue = $4,835

Gross Profit = Sales Revenue – Cost of Goods Sold
Gross Profit = $4,835 - $3,428
Gross Profit = $1,407

LIFO Method:

Cost of Goods sold = (10 * $122) + (10 * $132) + (4 * $142)
Cost of Goods sold = $1,220 + $1,320 + $568
Cost of Goods sold = $3,108

Cost of Ending Inventory = Cost of Goods Sold - Cost of Goods sold
Cost of Ending Inventory = $5,176 - $3,108
Cost of Ending Inventory = $2,068

Sales Revenue = (5 * $185) + (8 * $200) + (11 * $210)
Sales Revenue = $925 + $1,600 + $2,310
Sales Revenue = $4,835

Gross Profit = Sales Revenue – Cost of Goods Sold
Gross Profit = $4,835 - $3,108
Gross Profit = $1,727

Weighted Average Method:

Average Cost per Unit = Cost of Goods available for Sale / Units available for Sale
Average Cost per Unit = $5,176 / 38
Average Cost per Unit = $136.21

Cost of Goods sold = 24 * $136.21
Cost of Goods sold = $3,269

Cost of Ending Inventory = Cost of Goods Sold - Cost of Goods sold
Cost of Ending Inventory = $5,176 - $3,269
Cost of Ending Inventory = $1,907

Sales Revenue = (5 * $185) + (8 * $200) + (11 * $210)
Sales Revenue = $925 + $1,600 + $2,310
Sales Revenue = $4,835

Gross Profit = Sales Revenue – Cost of Goods Sold
Gross Profit = $4,835 - $3,269
Gross Profit = $1,566

Specific Identification:

Cost of Goods sold = (5 * $152) + (8 * $142) + (1 * $152 + 10 * $132)
Cost of Goods sold = $3,368

Cost of Ending Inventory = Cost of Goods Sold - Cost of Goods sold
Cost of Ending Inventory = $5,176 - $3,368
Cost of Ending Inventory = $1,808

Sales Revenue = (5 * $185) + (8 * $200) + (11 * $210)
Sales Revenue = $925 + $1,600 + $2,310
Sales Revenue = $4,835

Gross Profit = Sales Revenue – Cost of Goods Sold
Gross Profit = $4,835 - $3,368
Gross Profit = $1,467