**Cost Flow Methods**The following three identical units of Item Alpha are purchased during April:| **Item Alpha** | **Units** | **Cost** ||----------------|-----------|----------|| Apr. 2 | Purchase | 1 | $66 || Apr. 14 | Purchase | 1 | $70 || Apr. 28 | Purchase | 1 | $74 || Total | 3 | $210 || Average cost per unit | $70 ($210 ÷ 3 units) |Assume that one unit is sold on April 30 for $88.Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.---**Gross Profit and Ending Inventory**| Method | Gross Profit | Ending Inventory ||--------|--------------|------------------|| **a. First-in, first-out (FIFO)** | $22 | ✓ $144 || **b. Last-in, first-out (LIFO)** | $14 | ✗ $126 || **c. Weighted average cost** | $18 | ✗ $130 |---**Feedback****a.** Sales – cost of merchandise sold = gross profit. FIFO means that the first units purchased are assumed to be the first to be sold. Therefore, ending inventory is made up of the most recent purchases.**b.** Sales – cost of merchandise sold = gross profit. LIFO means the last units purchased are assumed to be the first to be sold. Therefore, ending inventory is made up of the first purchases.**c.** Sales – cost of merchandise sold = gross profit. Average cost means the average cost of all available units purchased is applied to the number of units sold and in ending inventory.

Name: **Cost Flow Methods**The following three identical units of Item Alph
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Description: **Cost Flow Methods**The following three identical units of Item Alpha are purchased during April:| **Item Alpha** | **Units** | **Cost** ||----------------|-----------|----------|| Apr. 2 | Purchase | 1 | $66 || Apr. 14 | Purchase | 1 | $70 || Apr.

Inventory refers to the cost of purchased goods that are bought with the motive to resell.

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The following three identical units of Item Alpha are purchased during April: Item Alpha Units Cost Apr. Purchase $66 14 Purchase 1 70 28 Purchase 74 Total 3 $210 Average cost per unit $70 ($210 ÷ 3 units) Assume that one unit is sold on April 30 for $88. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.

The following three identical units of Item Alpha are purchased during April: Item Alpha Units Cost Apr. Purchase $66 14 Purchase 1 70 28 Purchase 74 Total 3 $210 Average cost per unit $70 ($210 ÷ 3 units) Assume that one unit is sold on April 30 for $88. Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.

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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