QUESTION 1.
Beginning inventory........24 tires @ $61
Purchase.........6 tires @ $76
Sale.......17 tires @ $105
Requirements
1. Compute cost of goods sold and gross profit under FIFO.
2. Compute cost of goods sold and gross profits using LIFO.
3. Compute cost of goods sold and gross profits using average cost.
4. Which method results in the largest gross profit and why?
REQUIREMENT 1, 2, and 3 REQUIREMENT 4
Which method results in the largest gross profit and why?
The __________ method results in the largest gross profit because during times of __________ inventory prices, this method will produce the __________ cost of goods sold.
QUESTION 2.
Richmond Sporting Goods, which uses the FIFO method, has the following account balance at August 31, 2012, prior to releasing the financial statement for the year.
Inventory _ Cost of goods sold__ Sales revenue________
Credit Debit Credit Debit Credit Debit
BAL 14500 BAL 67000 BAL 117000
REQUIREMENT 1
Prepare any adjusting journal entry required from the given information.
Journal Entry___________________________
Date Account Debit Credit
August 31
REQUIRMENT 2
What value would Richmond report on the Balance sheet at August 31, 2012, for inventory?
According to the ____________ rule, Richmond Sporting Goods should report inventory on the August 31 balance sheet at ______________.
QUESTION 3.
REQUIREMENT 1
Supply the missing amounts for each of the following companies
Company Net sales Beg. Invent Net Purch End Invent Cost of goods sold Gross Profit
Red $103000 $190000 $64000 $17000 $37000
Yellow $26000 $93000 $92000 $41000
Orange $91000 $52000 $25000 $61000
Green $86000 $9000 $8000 $45000
REQUIREMENT 2
Prepare the income statement for Red company, which uses the periodic inventory system. Include a complete heading and show the full computation of cost of goods sold. Red's operating expenses for the year were $12000