Fifo method - Lecture notes 9 PDF

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Application Problem 7-3B a1-a2, b (Part Level Submission)

Saddlery Company sells leather saddles and equipment for horse enthusiasts. Saddlery uses the periodic inventory system. The following schedule relates to the company’s inventory for the month of May: Cost May 1

Sales

Beginning inventory

90 units

$36,000

5

Sale

60 units

9

Purchase

30 units

$13,200

13

Purchase

120 units

$57,600

24

Sale

120 units

$67,200

27

Sale

30 units

$19,200

30

Purchase

45 units

$31,200

$23,760

Calculate Saddlery Company’s cost of goods sold, gross margin, and ending inventory using FIFO. $ Cost of goods sold

92400

$ Gross margin 25200

$ Ending Inventory 38160

To find cost of goods sold you must divide the cost by the unit. Then multiply it by sale unit. You keep going in tell the last sale. Then add up all the sales Example

May 1 purchase (36000/90)= 400 May 5 sale 400 * 60 = 24000

b) sales revenue (sum of sales) – cogs = gross margin 117600- 92400= 25200

c) sum of costs – cogs = ending inventory 130560-92400- 38160...