Selbe Inc. is a retailer operating in Edmonton, Alberta. Selbe uses the perpetua
ID: 2377995 • Letter: S
Question
Selbe Inc. is a retailer operating in Edmonton, Alberta. Selbe uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory. (Assume that the inventory is not damaged.) Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Selbe Inc. for the month of January 2010.Unit Cost or
Date Description Quantity Selling Price
December 31 Ending Inventory 245 $31
January 2 Purchase 153 34
January 6 Sale 275 61
January 9 Sale return 15 61
January 9 Purchase 115 37
January 10 Purchase return 23 37
January 10 Sale 76 69
January 23 Purchase 153 40
January 30 Sale 184 76
For each of the following cost flow assumptions, calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit.
(1) LIFO. (Assume sales returns had a cost of $31 and purchase returns had a cost of $37.)
(2) FIFO. (Assume sales returns had a cost of $31 and purchase returns had a cost of $37.)
(3) Moving-average. (For moving average computations, round per unit cost to 3 decimal places, e.g. 12.355.)
LIFO FIFO Moving Average
Cost of goods sold $ $ $
Ending inventory $ $ $
Gross profit $ $ $
Explanation / Answer
Date
Sales
Beginning inventory+ purchases
(Available for sale)
Dec 31
7595
Jan 2
5202
Jan 6
16775
Jan 9
-915
Jan 9
4255
Jan 10
-851
Jan 10
5244
Jan 23
6120
Jan 30
13984
Total 35,088
Total 22,321
LIFO:
Date
Inventory:
Dec 31
245@$31
Jan 2
245@$31, 153@$34
Jan 6
123@$31
Jan 9
138@$31
Jan 9
138@$31, 115@$37
Jan 10
138@$31, 92@$37
Jan 10
138@$31, 16@$37
Jan 23
138@$31, 16@$37, 153@$40
Jan 30
123@$31
Ending inventory = 123@$31
For LIFO, ending inventory = 123@$31 = $3,813.
Costs of Goods sold = available for sale – ending inventory = 22,321 – 3813= $18,508
Gross profit = sales – cost of goods sold = 35,088 – 18,508 = $16,580
FIFO:
Date
Inventory:
Dec 31
245@$31
Jan 2
245@$31, 153@$34
Jan 6
123@$34
Jan 9
15@31, 123@$34
Jan 9
15@31, 123@$34, 115@$37
Jan 10
15@31, 123@$34, 92@$37
Jan 10
62@$34, 92@$37
Jan 23
62@$34, 92@$37, 153@$40
Jan 30
123@$40
Ending inventory = 123@$40
For FIFO, ending inventory = 123@$40 = $4,920
Costs of Goods sold = available for sale – ending inventory = 22,321 – 3813= $17,401
Gross profit = sales – cost of goods sold = 35,088 – 18,508 = $17,687
MOVING AVERAGE COST:
Date
Total cost in inventory
Number of Units
Cost per unit
Dec 31
7595
245
31
Jan 2
12,797
398
32.153
Jan 6
3,954.82
123
32.153
Jan 9
4,437.11
138
32.153
Jan 9
8,692.11
253
34.356
Jan 10
7,841.11
230
34.092
Jan 10
5,250.17
154
34.092
Jan 23
11,370.17
307
37.036
Jan 30
4,555.43
123
37.036
Ending inventory =4,555.43
For moving average cost, ending inventory = 4555.43
Costs of Goods sold = available for sale – ending inventory = 22,321 – 4,555.43= $17,765.57
Gross profit = sales – cost of goods sold = 35,088 – 17765.57= $17,322.43
Date
Sales
Beginning inventory+ purchases
(Available for sale)
Dec 31
7595
Jan 2
5202
Jan 6
16775
Jan 9
-915
Jan 9
4255
Jan 10
-851
Jan 10
5244
Jan 23
6120
Jan 30
13984
Total 35,088
Total 22,321