Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Laker Company uses a perpetual inventory system. During January, the company made the following purchases and sales:- Jan 1: Beginning inventory, 100 units at $10 each- Jan 10: Purchased 200 units at $12 each- Jan 20: Sold 150 units at $20 each- Jan 25: Purchased 100 units at $14 each- Jan 30: Sold 100 units at $20 eachCompute the gross profit for January using the FIFO inventory method.

$1,500

$1,600

$1,800

$1,700

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Verified step by step guidance

Step 1: Understand the FIFO (First-In, First-Out) inventory method. FIFO assumes that the oldest inventory items are sold first. This means the cost of goods sold (COGS) is calculated using the cost of the earliest purchases or beginning inventory.

Step 2: Calculate the cost of goods sold (COGS) for the sales on January 20. Since 150 units were sold, start by using the oldest inventory (100 units at $10 each) and then use the next batch (50 units at $12 each). The formula for COGS is: $ \text{COGS} = \text{Quantity Sold} \times \text{Unit Cost} $.

Step 3: Calculate the cost of goods sold (COGS) for the sales on January 30. Since 100 units were sold, use the remaining inventory from the January 10 purchase (150 units at $12 each, of which 50 units remain after the January 20 sale). The formula for COGS is: $ \text{COGS} = \text{Quantity Sold} \times \text{Unit Cost} $.

Step 4: Compute the total revenue for January. Revenue is calculated by multiplying the quantity sold by the selling price. For January 20, $ \text{Revenue} = 150 \times 20 $. For January 30, $ \text{Revenue} = 100 \times 20 $. Add these two amounts to get the total revenue.

Step 5: Calculate the gross profit for January. Gross profit is the difference between total revenue and total COGS. Use the formula: $ \text{Gross Profit} = \text{Total Revenue} - \text{Total COGS} $.