Windsor Company sells one product. Presented below is information for January for Windsor Company. Jan. 1 Inventory 108 units at $5 each
4 Sale 87 units at $8 each
11 Purchase 150 units at $7 each
13 Sale 123 units at $9 each
20 Purchase 168 units at $7 each
27 Sale 106 units at $11 each

Windsor uses the FIFO cost flow assumption. All purchases and sales are on account.

Required:
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.
b. Compute gross profit using the periodic system.
c. Assume Bramble uses a perpetual system. Prepare all necessary journal entries.
d. Compute gross profit using the perpetual system.

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