Question

FIFO Perpetual Inventory

The beginning inventory of merchandise at Rhodes Co. and data on purchases and sales for a three-month period ending June 30 are as follows:

Date		Transaction	Number of Units		Per Unit		Total
Apr. 3		Inventory	42		$150		$6,300
8		Purchase	84		180		15,120
11		Sale	56		500		28,000
30		Sale	35		500		17,500
May 8		Purchase	70		200		14,000
10		Sale	42		500		21,000
19		Sale	21		500		10,500
28		Purchase	70		220		15,400
June 5		Sale	42		525		22,050
16		Sale	56		525		29,400
21		Purchase	126		240		30,240
28		Sale	63		525		33,075

Required:

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the first-in, first-out method. 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.

Rhodes Co. Schedule of Cost of Merchandise Sold FIFO Method For the three-months ended June 30
	Purchases			Cost of Merchandise Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Apr. 3								$	$
Apr. 8		$	$
Apr. 11					$	$
Apr. 30
May 8
May 10
May 19
May 28
June 5
June 16
June 21
June 28
June 30	Balances					$			$

2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account. If an amount box does not require an entry, leave it blank.

	Description	Post. Ref.	Debit	Credit
Record sale
Record cost

3. Determine the gross profit from sales for the period.
$

4. Determine the ending inventory cost as of June 30.
$

5. Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower?

Answer 1

Solution:

		Purchases		Cost of	Merchandise Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit cost	Total cost	Quantity	Unit Cost	Total cost
Apr. 3							42	$150	$6300
8.	84	$180	$15120				42 84	$150 $180	$6300 $15120
11				42 14	$150 $180	$6300 $2520	70	$180	$12,600
30				35	$180	$6300	35	$180	$6300
May 08	70	$200	$14000				35 70	$180 $200	$6300 $14,000
May 10				35 7	$180 $200	$6,300 $1,400	63	$200	$12,600
May 19				21	$200	$4,200	42	$200	$8,400
May 28	70	$220	$15,400				42 70	$200 $220	$8,400 $15,400
June 5				42	$200	$8400	70	$220	$15,400
June 16				56	$220	$12,320	14	$220	$3080
June 21	126	$240	$30,240				14 126	$220 $240	$3,080 $30,240
June 28				14 49	$220 $240	$3,080 $11,760	77	$240	$18,480
June 30	Balance					$62,580			$18,480

2.)

No.	Transactions	General Journal	Debit ($)	Credit ($)
1.	1.	Accounts Receivable	161525
		Sales		161,525
		(To record the sales revenue)
2.	2.	Cost of merchandise sold	$$62,580
		Merchandise inventory		$62,580
		(To record the cost of merchandise sold)

* $161,525 =$28,000+ $17,500 + $21,000+ $10,500 + $22,050 + 29,400 + $33,075

3.) Gross profit = Sales revenue - Cost of goods sold

$98,945 = $161,525 - $62,580

4.)

Ending inventory =77 units ×$240 =18,480

5.)

Since the price rose from $150 for the April 3 inventory to $240 for the purchase on June 21, we would expect that under last in, first out (LIF0) the inventory would be lower.

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