1 answer

Lea E6-19 Comparing amounts for cost of goods sold, ending inventory, and gross profit-FIFO and LIFO...

Question:

Lea E6-19 Comparing amounts for cost of goods sold, ending inventory, and gross profit-FIFO and LIFO Assume that Toys Galore
Lea E6-19 Comparing amounts for cost of goods sold, ending inventory, and gross profit-FIFO and LIFO Assume that Toys Galore store bought and sold a line of dolls during December as follows: Dec. 1 Beginning merchandise inventory 8 Sale 14 Purchase 21 Sale 13 units @ $ 9 each 8 units @ $ 22 each 16 units @ $ 14 each 14 units @ $ 22 each Requirements 1. Compute the cost of goods sold, cost of ending merchandise inventory, and gross profit using the FIFO inventory costing method. 2. Compute the cost of goods sold, cost of ending merchandise inventory, and gross profit using the LIFO inventory costing method. 3. Which method results in a higher cost of goods sold? 4. Which method results in a higher cost of ending merchandise inventory? 5. Which method results in a higher gross profit?

Answers

Sales Revenue = 8 * $22.00 + 14 * $22.00
Sales Revenue = $484

Answer to Requirement 1:

Date Goods Purchased # of units Cost per unit Cost of Goods Sold Cost per cost of # of units unit Goods Sold 13 Dec. 01 Dec.

Cost of Goods Sold = $243
Cost of Ending Merchandise Inventory = $98

Gross Profit = Sales Revenue - Cost of Goods Sold
Gross Profit = $484 - $243
Gross Profit = $241

Answer to Requirement 2:

Date Goods Purchased # of units Cost per unit Cost of Goods Sold # of units Cost per Cost of unit Goods Sold Dec. 01 Dec. 08

Cost of Goods Sold = $268
Cost of Ending Merchandise Inventory = $73

Gross Profit = Sales Revenue - Cost of Goods Sold
Gross Profit = $484 - $268
Gross Profit = $216

Answer to Requirement 3:

LIFO resulted in a higher cost of goods sold.

Answer to Requirement 4:

FIFO resulted in a higher cost of merchandise inventory.

Answer to Requirement 5:

FIFO resulted in a higher gross profit.

.

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