Question

Neverstop Corporation sells item A as part of its product line. Information about the beginning inventory, purchases, and sales of item A are given in the following table for the first six months of the current year. The company uses a perpetual inventory system:

	Purchases							Sales
Date	Number of Units			Unit Cost				Number of Units			Sales Price
January 1 (beginning inventory)		580		$	4.10
January 24									380		$	5.60
February 8		680		$	4.20
March 16									380		$	5.60
June 11		680		$	4.20

2. Compute the gross profit for the first six months of the current year by using the FIFO costing method. (Do not round intermediate calculations and round the final answer to 2 decimal places.)

Answer 1

Solution

Gross profit

$ 1,122

Working

	Units	Cost per unit	value
Beginning Balance	580	$                     4.10	$ 2,378
Purchases
	680	$                     4.20	$ 2,856
	680	$                     4.20	$ 2,856
Cost of goods available for sale	1940		$ 8,090

.

FIFO
Total Units Available for sale		1940
Units Sold		760
Closing Stock in Units		1180
Valuation
Ending Inventory	680	@	$               4.20	$        2,856.00
	500	@	$               4.20	$        2,100.00
Value Of Ending Inventory				$        4,956.00
Cost of Goods sold	8090 minus 4956			$        3,134.00

.

	FIFO
Sales revenue (760 x 5.6)	$              4,256
Less: Cost of Goods Sold	$              3,134
Gross profit	$              1,122