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FIFO cost method Gross Profit = Sales - Cost of Good Sold (CGS) Company started new business in August - 1st year of operations sales $3,375 ($15: 625 untis) - CGS $5,500 = $3,875 Inventory Account: Perpetual Inventory System - At cost Purchases (DR + increase) Cost of Goods Sold (CR - decrease) Balance (Ending) Inventory cost flow Date Unit Unit Cost Total Cost Unit Unti Cost Total Cost Unit Unit Cost Total Cost Beginning Inv 1-Aug purcho units 2-Aug 250 7 1,750 250 7 1,750 250 7 1,750 purcho0 untis 500 5,000 sold 300 units 450 10 4,500 450 10 4,500 purcho0 units 900 17 10,800 sold 325 untis 125 10 1,250 900 17 10,800 End of August Total 12,050 Check # 2 17,550 = 17,550 Inventory Journal Entries DR CR ALATE - Purchase Iny Dr Inventory 1,750 Beg Bal on account CR Accounts Payable 1,750 Tot Purch 17,550 CGAS 17,550 300 units) Aug 10 - Sold Inv Dr Accounts Receivable 4,500 CGS 5,500 with sale of $15/ unit CR Sales (300 x $15/ units) 4,500 End Bal 12,050 on account What is gross profit from Aug 10 transaction Dr Cost of Goods Sold 2,250 Sales - Cost of Good Sold = Gross Profit CR Inventory 2,250 $ 4,500 - 2.250 = $ 2.250