Marcis, Inc. sells sweaters online. At the beginning of July, the company had on hand 120 sweaters that had been purchased in June at a cost of $33 each. During July, they purchased 780 sweaters at a cost of $35 each and 265 at a cost of $38 each. Sales during July totaled 870 sweaters, sold at a price of $85 each. Half the sales were for cash and half were on credit; all credit customers paid in the following month. Marcis uses the FIFO method to physically handle goods, and would like to use the method that maximizes profits for financial reporting purposes.

1. Which method of inventory valuation would you recommend that Marcis use in order to report the highest net income? _______________ 2. Explain why you recommend this method: ______________________________________________ _________________________________________________________________________________

3. In what month should revenue be recorded? _________________ What is the expense called related to these sales? ________________ In what month should this expense be recorded? ______________

4. Using FIFO: a. What is total goods available for sale in units and dollars? b. What is July ending inventory in units and dollars? c. Write the entries to record sales for the month: d. What is July gross profit?

5. Using Average Cost: a. What is July ending inventory in units and dollars? b. What is July gross profit and the gross profit percentage?