Henri Company's inventory records show the following data: $$\begin{array} { l r r }
& \underline { \text { Units } } & \underline { \text { Unit Cost } } \
\text { Inventory, January 1 } & 10,000 & \$ 9.20 \
\text { Purchases: June 18 } & 9,000 & 8.00 \
\text { November 8 } & 6,000 & 7.25
\end{array}$$
A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. If the company uses FIFO what is the gross profit for the period?

Question

Henri Company's inventory records show the following data: $$\begin{array} { l r r } 
& \underline { \text { Units } } & \underline  { \text { Unit Cost } } \
\text { Inventory, January 1 } & 10,000 & \$ 9.20 \
\text { Purchases: June 18 } & 9,000 & 8.00 \
\text { November 8 } & 6,000 & 7.25
\end{array}$$
 A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. If the company uses FIFO what is the gross profit for the period?

Quizplus · Accepted Answer

Under FIFO, the first items purchased are the first sold. The cost of goods sold (COGS) calculation starts with the oldest inventory. Here, 10,000 units at $9.20, 9,000 units at $8.00, and 6,000 units at $7.25 are purchased. With 3,000 units remaining, it means 22,000 units were sold (10,000 + 9,000 + 6,000 - 3,000). The COGS calculation under FIFO would be: - First, all 10,000 units at $9.20 = $92,000- Then, all 9,000 units at $8.00 = $72,000- Finally, 3,000 of the 6,000 units purchased on November 8 at $7.25 = $21,750Total COGS = $92,000 + $72,000 + $21,750 = $185,750Revenue (22,000 units at $12 each) = $264,000Gross Profit = Revenue - COGS = $264,000 - $185,750 = $78,250

Henri Company's Inventory Records Show the Following Data A Physical Inventory on December 31 Shows 3000 Units on l