Date Transactions Units Unit Cost Total Cost $1,280 August 1 August 4 August 11 August 13 August 20 August 26 August 29 $160 Beginning inventory Sale ($225 each) 8 Purchase 10 150 1,500 Sale ($240 each) 8 Purchase 10 140 1,400 Sale ($250 each) 11 Purchase 11 130 1,430 $5,610
Pete’s Tennis Shop has the following transactions related to its top-selling Wilson tennis racket for the month of August:
Required:
1. Calculate ending inventory and cost of goods sold at August 31, using the specific identification method. The August 4 sale consists of rackets from beginning inventory, the August 13 sale consists of rackets from the August 11 purchase, and the August 26 sale consists of one racket from beginning inventory and 10 rackets from the August 20 purchase.
2. Using FIFO, calculate ending inventory and cost of goods sold at August 31.
3. Using LIFO, calculate ending inventory and cost of goods sold at August 31.
4. Using weighted-average cost, calculate ending inventory and cost of goods sold at August 31.
5. Calculate sales revenue and gross profit under each of the four methods.
6. Comparing FIFO and LIFO, which one provides the more meaningful measure of ending inventory? Explain.
7. If Pete’s chooses to report inventory using LIFO, record the LIFO adjustment.
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