Mercer Inc. is a retailer operating in British Columbia. Mercer uses the perpetu
ID: 2426794 • Letter: M
Question
Mercer Inc. is a retailer operating in British Columbia. Mercer uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory; 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 Mercer Inc. for the month of January 2014
Date
Description
Quantity
Unit Cost or Selling Price
19
Calculate the Moving-average cost per unit at January 1, 5, 8, 15, 20, & 25.
For each of the following cost flow assumptions, calculate cost of goods sold, ending inventory, and gross profit. (1) LIFO. (2) FIFO. (3) Moving-average cost.
Date
Description
Quantity
Unit Cost or Selling Price
January 1 Beginning inventory 200 $12 January 5 Purchase 280 15 January 8 Sale 220 24 January 10 Sale return 20 24 January 15 Purchase 110 16 January 16 Purchase return 10 16 January 20 Sale 180 29 January 25 Purchase 4019
Explanation / Answer
(a)Cost of Goods Available for Sale
Date Explanation Units Unit Cost Total Cost
June 1 Beginning Inventory 200 12 $ 2400
June 5 Purchase 280 15 4200
June 15 Purchase 110 16 1760
June 16 Purchase return (10) 16 (160)
June 28 Purchase 40 19 760
Total 620 $8960
Ending Inventory in Units:
Units available for sale 620
—Sales (220– 20 + 180) 380
Units remaining in ending inventory 240
Sales revenue
220 units @24 5280
20 units (sales return) @24 (480)
180 units @29 5220
Sales revenue 10020
(1)LIFO
(i)Ending Inventory
June 1 200 units @12 2400
June 5 40 units @ 15 600
240 units 3000
ii)cost of goods sold
cost of goods available for sale 8960
- ending inventory 3000
Cost of goods sold 5960
iii)Gross profit
Sales 10020
-cogs 5960
Gross profit 4060
iv) gross profit rate = 4060/10020 =40.51%