Natalie is busy est for
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Instructions: Please DO NOT Excel. Please provide detailed explanations on how you got your answer. Calculate the average cost.
cost of goods available for sale: 6,424
Transcribed Image Text: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), but the supplier cannot guarantee the invoice price.
Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory.
The following transactions occur in February to May 2021.
Feb. 2
16
25
Mar. 2
30
31
Apr. 1
13
30
May 4
27
Natalie buys two deluxe mixers on account from Kzinski Supply Co. for $1,150 ($575 each), FOB destination, terms n/30.
She sells one deluxe mixer for $1,100 cash.
She pays the amount owed to Kzinski.
She buys one deluxe mixer on account from Kzinski Supply Co. for $592, FOB destination, terms n/30.
Natalie sells two deluxe mixers for a total of $2,200 cash.
She pays the amount owed to Kzinski.
She buys two deluxe mixers on account from Kzinski Supply Co. for $1,172 ($586 each), FOB destination, terms n/30.
She sells three deluxe mixers for a total of $3,300 cash.
Natalie pays the amount owed to Kzinski.
She buys three deluxe mixers on account from Kzinski Supply Co. for $1,800 ($600 each), FOB destination, terms n/30.
She sells one deluxe mixer for $1,100 cash.
Transcribed Image Text: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 Gross profit rate to 2 decimal places, e.g. 25.22%.)
Ending
inventory
Cost of
goods sold
Gross profit
Gross profit
rate
69
$
LIFO
2,285
4,139
3,561
46.25 %
60
$
194
60
FIFO
2,386
4,038
3,662
47.56
%
69
69
69
Average Cost
589
4,125
3,575
46.43
%
Expert Solution
Step 1
As all the answers are correct, except the cost of goods sold under Average cost method. So, i have only calculated the incorrect portion.
Average cost method
Cost of goods sold= Cost of goods available for sale-Ending inventory
= $6,424-2,336
= $4,088
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Follow-up Question
There's four answers that I got wrong and you only submitted one answer. I need 4 answers for the average cost method.
Solution
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