Question

Cheyenne Corp. had the following inventory transactions occur during 2022: Feb. 1, 2022 Mar. 14, 2022 May 1, 2022 Purchase Purchase Purchase Units 79 136 97 Cost/unit $79 $83 $86 The company sold 224 units at $111 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using FIFO? O $6561 $5981 $18303 O $18883

Answer 1

Periodic System FIFO Method: Date Activity 01-Feb Purchase 14-Mar Purchase 01-May Purchase No of units Unit cost Total Cost 79 $ 79.00 $ 6,241.00 136 $ 83.00 $ 11,288.00 97 $ 86.00 $ 8,342.00 Cost of goods available for sale $ 25.871.00 Cost of goods sold :224 units : 79 units @ $79 136 units @ $83 9 units @ $86 $ 6,241.00 $ 11,288.00 $ 774.00 $ 18,303.00 Note : FIFO Method Assumes that Goods which are purchased first will be sold First, so in Ending inventory units will be there which are purchased last. Gross profit Sales (224 units @ $111) Less : Cost of goods sold Gross profit $ 24,864.00 $(18,303.00) $ 6,561.00 Option (A) is correct Since it was asked to calculate gross profit no need to deduct tax expense