### Learning Objectives 2, 3#### 1. COGS $2,140### Inventory Transactions for AB Tire StoreAssume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:| Date | Transaction | Quantity | Unit Price ||------|-----------------------------------|----------|------------|| May 1 | Beginning merchandise inventory | 16 tires | $65 each || May 11 | Purchase | 10 tires | $78 each || May 23 | Sale | 12 tires | $88 each || May 26 | Purchase | 14 tires | $80 each || May 29 | Sale | 18 tires | $88 each |### Requirements1. **Compute cost of goods sold and gross profit using the FIFO inventory costing method.**2. **Compute cost of goods sold and gross profit using the LIFO inventory costing method.**### Explanation#### FIFO (First In, First Out) MethodFIFO assumes that the oldest inventory items are sold first. The cost of goods sold (COGS) will be based on the cost of the earliest purchases.#### LIFO (Last In, First Out) MethodLIFO assumes that the newest inventory items are sold first. The cost of goods sold (COGS) will be based on the cost of the latest purchases.This exercise is designed to familiarize students with the application of FIFO and LIFO inventory costing methods, and how these methods affect the cost of goods sold and the gross profit calculations. **Inventory Transactions Example for AB Tire Store**AB Tire Store has conducted a series of perpetual inventory transactions for a specific line of tires during the month of May. Below is the summary of these transactions:**Transactions Details**| Date | Description | Quantity | Unit Price ||------------|------------------------------|------------|------------|| May 1 | Beginning merchandise inventory | 16 tires | $65 each || May 11 | Purchase | 10 tires | $78 each || May 23 | Sale | 12 tires | $88 each || May 26 | Purchase | 14 tires | $80 each || May 29 | Sale | 18 tires | $88 each |**Requirements for Calculation**1. **Compute the cost of goods sold (COGS) and gross profit using the FIFO (First In, First Out) inventory costing method.**2. **Compute the cost of goods sold (COGS) and gross profit using the LIFO (Last In, First Out) inventory costing method.**3. **Compute the cost of goods sold (COGS) and gross profit using the weighted-average inventory costing method.** - Round the weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.4. **Determine which method yields the largest gross profit and explain why.**This exercise aims to demonstrate how different inventory costing methods impact the cost of goods sold and gross profit in a retail setting.

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Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires: May 1 Beginning merchandise inventory 11 Purchase 23 Sale 26 Purchase 29 Sale 16 tires @ $ 65 each 10 tires @ $78 each 12 tires @ $88 each 14 tires @ $ 80 each 18 tires @ $88 each Requirements 1. Compute cost of goods sold and gross profit using the FIFO inventory costing method. 2. Compute cost of goods sold and gross profit using the LIFO inventory costing method. 3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.) 4. Which method results in the largest gross profit, and why?

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires: May 1 Beginning merchandise inventory 11 Purchase 23 Sale 26 Purchase 29 Sale 16 tires @ $ 65 each 10 tires @ $78 each 12 tires @ $88 each 14 tires @ $ 80 each 18 tires @ $88 each Requirements 1. Compute cost of goods sold and gross profit using the FIFO inventory costing method. 2. Compute cost of goods sold and gross profit using the LIFO inventory costing method. 3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.) 4. Which method results in the largest gross profit, and why?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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