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Furniture began June with merchandise inventory of 47 sofas that cost a total of $ 34310. During the​ month, Town Furniture purchased and sold merchandise on account as​ follows:

June 7 Purchase 15 sofas $700 each
June 14 Sale 24 sofas $1,350 each
June 18 Purchase 62 sofas $780 each
June 27 Sale 32 sofas $1,050 each

Prepare a perpetual inventory​ record, using the LIFO inventory costing​ method, and determine the​ company's cost of goods​ sold, ending merchandise​ inventory, and gross profit.

1 answer

To prepare a perpetual inventory record using the LIFO (Last In, First Out) inventory costing method for Town Furniture, we’ll track the inventory transactions over the month of June.

Initial Inventory (June 1)

  • 47 sofas at $34,310 total (which means $34,310 / 47 sofas = $730 each)

  1. June 7: Purchase 15 sofas at $700 each

    • Inventory after Purchase:
      • 47 sofas at $730 each
      • 15 sofas at $700 each
    • Total Inventory:
      • Total Sofas: 47 + 15 = 62 sofas
      • Total Cost: (47 × $730) + (15 × $700) = $34,310 + $10,500 = $44,810

  2. June 14: Sale of 24 sofas at $1350 each using LIFO

    • Under LIFO, we sell the most recently purchased sofas first.

    • We sell all 15 sofas purchased on June 7 and 9 sofas from the original inventory.

    • Cost of Goods Sold (COGS):

      • 15 sofas at $700 each = $10,500
      • 9 sofas at $730 each = $6,570
      • Total COGS for this sale = $10,500 + $6,570 = $17,070

    • Ending Inventory after Sale:

      • Remaining: 38 sofas
        • 38 sofas from the first inventory at $730 each
      • Total Inventory: 38 sofas
      • Total Cost: 38 × $730 = $27,740

  3. June 18: Purchase 62 sofas at $780 each

    • Inventory after Purchase:
      • 38 sofas at $730 each
      • 62 sofas at $780 each
    • Total Inventory:
      • Total Sofas: 38 + 62 = 100 sofas
      • Total Cost: (38 × $730) + (62 × $780) = $27,740 + $48,360 = $76,100

  4. June 27: Sale of 32 sofas at $1,050 each using LIFO

    • Again, using LIFO, we sell the most recently purchased sofas first.

    • We will sell 32 sofas from the latest purchase on June 18.

    • Cost of Goods Sold (COGS):

      • 32 sofas at $780 each = $24,960
      • Total COGS for this sale = $24,960

    • Ending Inventory after Sale:

      • Remaining: 100 - 32 = 68 sofas
        • 30 sofas from the June 18 purchase at $780 each
        • 38 sofas from the first inventory at $730 each
      • Total Cost: (30 × $780) + (38 × $730) = $23,400 + $27,740 = $51,140

Summary of Inventory and Financials:

  • Cost of Goods Sold (COGS):

    • From June 14 sale: $17,070
    • From June 27 sale: $24,960
    • Total COGS for the month = $17,070 + $24,960 = $42,030

  • Ending Merchandise Inventory at Month-End:

    • Total ending inventory: $51,140

  • Sales Revenue:

    • From June 14 sale: 24 sofas × $1,350 = $32,400
    • From June 27 sale: 32 sofas × $1,050 = $33,600
    • Total Sales Revenue = $32,400 + $33,600 = $66,000

  • Gross Profit:

    • Gross Profit = Sales Revenue - COGS
    • Gross Profit = $66,000 - $42,030 = $23,970

Summary:

  • Cost of Goods Sold: $42,030
  • Ending Merchandise Inventory: $51,140
  • Gross Profit: $23,970