Question

Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data for portable DVD players are as follows: Apr. 1 Inventory 57 units @ $94 10 Sale 43 units 15 Purchase 23 units @ $100 20 Sale 19 units 24 Sale 8 units 30 Purchase 24 units @ $104 The business maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column. Cost of the Merchandise Sold Schedule First-in, First-out Method Portable DVD Players Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity Inventory Unit Cost Inventory Total Cost Apr. 1 $ $ Apr. 10 $ $ Apr. 15 $ $ Apr. 20 Apr. 24 Apr. 30 Apr. 30 Balances $ $ b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Answer 1

Solution 1:

Computation of ending inventory and COGS under FIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Apr	57	$94.00	$5,358.00	0	$0.00	$0.00	0	$0.00	$0.00	57	$94.00	$5,358.00
10-Apr	57	$94.00	$5,358.00	0	$0.00	$0.00	43	$94.00	$4,042.00	14	$94.00	$1,316.00
15-Apr	14	$94.00	$1,316.00	23	$10.00	$230.00	0	$0.00	$0.00	14	$94.00	$1,316.00
										23	$100.00	$2,300.00
20-Apr	14	$94.00	$1,316.00	0	$0.00	$0.00	14	$94.00	$1,316.00	18	$100.00	$1,800.00
	23	$100.00	$2,300.00				5	$100.00	$500.00
24-Apr	18	$100.00	$1,800.00	0	$0.00	$0.00	8	$100.00	$800.00	10	$100.00	$1,000.00
30-Apr	10	$100.00	$1,000.00	24	$104.00	$2,496.00	0	$0.00	$0.00	10	$100.00	$1,000.00
										24	$104.00	$2,496.00
Total							70		$6,658.00	34		$3,496.00

Solution b:

As inventory prices are increasing in nature, therefore inventory to be lower using Last in first out method.