Accounting – Lora Picture Framing began March with 73 units of inventory that cost $23 each

| January 31, 2017

Question
1. Lora Picture Framing began March with 73 units of inventory that cost $23 each. During the month, Lora made the following purchases and sales:

Date

Units

Price $

March 3 Purchase

March 8 Sales

March 12 Purchase
March 12 Purchase

March `15 Sales

March 19 Sales

March 25 Purchase

112

85

60

45

55

75

65

25

27

30

35

The business uses the perpetual inventory system.

Required

1. Determine the ending inventory and cost-of-goods-sold amounts for the March financial statements under (a) average cost, (b) FIFO cost, and (c) LIFO cost. Round average cost per unit to the nearest cent and all other amounts to the nearest dollar. (6 Marks)

2. Sales price per unit is $50. Calculate Nelson’s gross profit for March under each method. (3 Marks)

3. Physical stock count at 31 March revealed 89 units of inventory on hand. Under FIFI method calculate loss of inventory and record the journal entry to bring the ending inventory to its correct balance. (1 Mark)

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