The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination). Assume that Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory. Inventory as on January 31, 2019 represents three deluxe mixer purchased at a unit cost of $595. The following transactions occur in February to May 2019. Feb. 2 Natalie buys two deluxe mixers on account from Kzinski Supply Co. for $1,200 ($600 each), FOB destination, terms n/30. 16 She sells one deluxe mixer for $1,150 cash. 25 She pays the amount owed to Kzinski. Mar. 2 She buys one deluxe mixer on account from Kzinski Supply Co. for $618, FOB destination, terms n/30. 30 Natalie sells two deluxe mixers for a total of $2,300 cash. 31 She pays the amount owed to Kzinski. Apr. 1 She buys two deluxe mixers on account from Kzinski Supply Co. for $1,224 ($612 each), FOB destination, terms n/30. 13 She sells three deluxe mixers for a total of $3,450 cash. 30 Natalie pays the amounts owed to Kzinski. May 4 She buys three deluxe mixers on account from Kzinski Supply Co. for $1,875 ($625 each), FOB destination, terms n/30. 27 She sells one deluxe mixer for $1,150 cash.

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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Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week.

The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination). Assume that Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory.

Inventory as on January 31, 2019 represents three deluxe mixer purchased at a unit cost of $595.

The following transactions occur in February to May 2019.

Feb. 2		Natalie buys two deluxe mixers on account from Kzinski Supply Co. for $1,200 ($600 each), FOB destination, terms n/30.
16		She sells one deluxe mixer for $1,150 cash.
25		She pays the amount owed to Kzinski.
Mar. 2		She buys one deluxe mixer on account from Kzinski Supply Co. for $618, FOB destination, terms n/30.
30		Natalie sells two deluxe mixers for a total of $2,300 cash.
31		She pays the amount owed to Kzinski.
Apr. 1		She buys two deluxe mixers on account from Kzinski Supply Co. for $1,224 ($612 each), FOB destination, terms n/30.
13		She sells three deluxe mixers for a total of $3,450 cash.
30		Natalie pays the amounts owed to Kzinski.
May 4		She buys three deluxe mixers on account from Kzinski Supply Co. for $1,875 ($625 each), FOB destination, terms n/30.
27		She sells one deluxe mixer for $1,150 cash.

Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following
methods: LIFO, FIFO, and average cost. (Round average cost per unit to 3 decimal places, e.g. 2.225 and average-cost answers to 2
decimal places, e.g. 5,275.05. Round gross profit rate to 2 decimal places, e.g. 25.22%. Round all other answers to O decimal places, e.g.
2,525.)
LIFO
FIFO
Average Cost
Ending
$
2385
2487
$
inventory
Cost of goods
$
4317
$
4215
$
sold
Gross profit
$
3733
$
3835
$
Gross profit
46.37
47.64
rate
%24
%24
%24
%24
%24

- Your answer is incorrect.
Determine the cost of goods available for sale.
Cost of goods available for sale
$
eTextbook and Media
%24

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