Mercado Company's inventory transactions in the fiscal year ended December 31, 2002, follow: ...
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Accounting
Mercado Company's inventory transactions in the fiscal year ended December 31, 2002, follow:
Jan.
1
Beginning Inventory
775 units @ $52/unit
Jan.
10
Purchase
600 units @ $53/unit
Feb.
13
Purchase
225 units @ $54/unit
Jul.
21
Purchase
285 units @ $55/unit
Aug.
5
Purchase
450 units @ $56/unit
Mercado Company uses a perpetual inventory system. Its inventory had a selling price of $115 per unit, and it entered into the following current-year sales transactions:
Feb.
15
Sales
515 units @ $115/unit
Aug.
10
Sales
275 units @ $115/unit
Required:
1. Compute the cost of goods available for sale and the number of units available for sale.
2. Compute the number of units in the ending inventory.
3. Compute the cost assigned to ending inventory using (a) FIFO; (b) Specific Identification; and (c) Weighted-Average.
4. Compute the gross profit earned by the company for each of the costing methods in part 3.
Analysis Component
5. If Mercado Company's manager earns a bonus based on a percentage of gross profit, which method of inventory costing will the manager likely prefer?
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