Answer:
a. See part a of the attached excel file for the journal entries under a periodic system.
b. Gross Profit = $1,050
c. See part b of the attached excel file for the journal entries under a periodic system.
d. Gross Profit = $973
Explanation:
a. Assume Bramble uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units.
Note: See part a of the attached excel file for the journal entries under a periodic system.
A periodic system is a method of inventory under which cost of goods sold is calculated at the end of a specific time period such week, month, quarter, or year. In this question, the specific time period is month.
Units in ending inventory = Beg Inventory units + Units purchased - Units sold = 108 + (150 + 168) - (87 + 123 + 106) = 110 units
When FIFO method is used with a periodic system, goods purchased first are sold first.
Therefore, ending inventory in this case will be 106 units purchased last on Jan 20 at $6 per unit and 4 units from the purchase of Jan 20 at $7 each.
b. Compute gross profit using the periodic system.
Gross Profit = Sales revenue - Cost of goods sold = Sum of all sales during the month - Cost of goods sold at the end of the month
From the journal entries in the part a of the attached excel file, we have:
Gross Profit = ($696 + 1,107 + $1,166) - $1,464 = $2,969 - $1,464 = $1,050
c. Assume Bramble uses a perpetual system. Prepare all necessary journal entries.
Note: See part b of the attached excel file for the journal entries under a periodic system.
A perpetual system is a method of inventory under which cost of goods sold for each sales is calculated separately.
d. Compute gross profit using the perpetual system.
Gross Profit = Sales revenue - Cost of goods sold = Sum of all sales during the month - Sum of all cost of goods sold during the month
From the journal entries in the part b of the attached excel file, we have:
Gross Profit =
Gross Profit = ($696 + $1,107 + $1,166) - ($435 + $819 + $742)= $2,969 - $1,996 = $973
