Question

(15 points) Fred's Lawn Mower Sales opened on May 1 and during May had in inventory 3 zero turn mowers with 25 horsepower engines: Serial number 001 was added to inventory on May 1 at an amount of $4,500. Serial Number 002 was added to inventory on May 18 at an amount of $6,500. Serial number 003 was added to inventory on May 27 at an amount of $7,000. Components of the mowers were subject to new tariffs which increased the amount that Fred had to pay for them during May. All are identical except for the color. Fred places them on his lot for sale at a price of $10,000. Fred sold one of them during May at the price of $10,000. Determine Fred's Gross Profit for his Income Statement for May and his remaining inventory for his Balance Sheet at the end of May for each of the following inventory valuation methods: First In First Out, FIFO Last In First Out, LIFO

Answer 1

- Page ☺ DATE PAGE _ Fred's Lawn Mover Sales a) FIFO Method I Gros Profit = Sales - cost of goods sold $10000 - $45oo = $ 5500 (serial number oor as it was purchared earliest and thus considered to be sold at the earliest in FIFO method) Cor Proht = $ 5500 closing Inventory = cost of serial number 002 and Serial number 003 $ 6500 + $ 7000 = $13700 - - closing inventory = $13500 LIFO Method on Road = $10000 - $7000 = $3000 a serial number 003 is considered to be sold as purchared latest and thus considered to for cold at the earliest in LIFO metupd) - gross pront = $3000 Closy Inventory = cost of serial number 001 and serial number oor = $ 4500 + $ 650o. = $11000 - closing inventory = $11000

DATE PAGE Specific Identification (serial number 002) gross profta $ 10000 - 46500 = $3500 I closing inventory = 001 003 cost of serial number and serial number - uso +7000 i $115oo.