E6-23A. (Learning Objective 2: Compare gross profit-FIFO versus LIFO-falling prices) Suppose a Walmart store in Fillmore, Missouri, ended January 2024 with 900,000 units of merchandise that cost $$ \$ 5 $$ each. Suppose the store then sold 50,000 units for $$ \$ 510,000 $$ during February. Further, assume the store made two large purchases during February as follows: Feb $$ 10 \quad \begin{array}{rr}10,000 ext { units @ } \$ 3.10=\$ 31,000 \ 21 & 25,000 ext { units @ } \$ 2.20=\$ 55,000\end{array} $$ Requirements 1. Calculaté the store's gross profit under both FIFO and LIFO at February 28. 2. What caused the FIFO and LIFO gross profit figures to differ?

Question

E6-23A. (Learning Objective 2: Compare gross profit-FIFO versus LIFO-falling prices) Suppose a Walmart store in Fillmore, Missouri, ended January 2024 with 900,000 units of merchandise that cost $$ \$ 5 $$ each. Suppose the store then sold 50,000 units for $$ \$ 510,000 $$ during February. Further, assume the store made two large purchases during February as follows: Feb $$ 10 \quad \begin{array}{rr}10,000 	ext { units @ } \$ 3.10=\$ 31,000 \ 21 & 25,000 	ext { units @ } \$ 2.20=\$ 55,000\end{array} $$ Requirements 1. Calculaté the store's gross profit under both FIFO and LIFO at February 28. 2. What caused the FIFO and LIFO gross profit figures to differ?

Reed Nguyen · Accepted Answer

The FIFO and LIFO gross profit figures differ due to the method of valuing inventory. FIFO assumes the oldest inventory is sold first, while LIFO assumes the most recent inventory is sold first.

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