Lupulin Limited stocks a variety of sports equipment for

sale #2020
Lupulin Limited stocks a variety of sports equipment for sale

Lupulin Limited stocks a variety of sports equipment for sale to institutions. The following stock
record card for basketballs was taken from the records at the December 31, 2017 year end:

A physical inventory on December 31, 2017, reveals that 100 basketballs are in stock. The
bookkeeper informs you that all the discounts were taken. Assume that Lupulin Limited uses a
periodic inventory system and records purchases at their invoice price less discounts. During
2017, the average sales price per basketball was $22.25.

Instructions

(a) Calculate the December 31, 2017 inventory using the FIFO formula.

(b) Calculate the December 31, 2017 inventory using the weighted average cost formula.
(Round unit costs to the nearest cent.)

(c) Prepare income statements for the year ended December 31, 2017, as far as the "gross
profit" line under each of the FIFO and weighted average methods, and calculate the gross
profit rate for each. Explain the difference in the gross profit under the two methods.

(d) If the selling prices for the basketballs that were sold follow the same pattern as their
wholesale prices from the supplier, might this have an effect on the inventory cost that is
reported on the December 31, 2017 balance sheet? (Hint: Review your answers to parts [a] to
[c].)

Lupulin Limited stocks a variety of sports equipment for sale

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