Question

The beginning inventory at Dunne 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	72		$450		$32,400
8		Purchase	144		540		77,760
11		Sale	96		1,500		144,000
30		Sale	60		1,500		90,000
May 8		Purchase	120		600		72,000
10		Sale	72		1,500		108,000
19		Sale	36		1,500		54,000
28		Purchase	120		660		79,200
June 5		Sale	72		1,575		113,400
16		Sale	96		1,575		151,200
21		Purchase	216		720		155,520
28		Sale	108		1,575		170,100

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 Goods Sold Unit Cost column and in the Inventory Unit Cost column.

2. Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account.

Record sale
Record cost

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

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

Answer 1

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.

	Purchases			Cost of goods sold			Ending inventory
Date	Unit	Unit Cost	total Cost	Unit	Unit Cost	Total Cost	Unit	Unit Cost	Total Cost
Apr 3							72	450	32400
Apr 8	144	540	77760				72 144	450 540	32400 77760
Apr 11				72 24	450 540	32400 12960	120	540	64800
Apr 30				60	540	32400	60	540	32400
May 8	120	600	72000				60 120	540 600	32400 72000
May 10				60 12	540 600	32400 7200	108	600	64800
May 19				36	600	21600	72	600	43200
May 28	120	660	79200				72 120	600 660	43200 79200
June 5				72	600	43200	120	660	79200
June 16				96	660	63360	24	660	15840
June 21	216	720	155520				24 216	660 720	15840 155520
June 28				24 84	660 720	15840 60480	132	720	95040
June 30	Balance					321840			95040

Journal entry

	account and explanation	debit	credit
Record Sale	Account receivable	830700
	Sales revenue		830700
	(To record sales)
Record Cost	Cost of goods sold	321840
	Inventory		321840
	(To record cost)

3) Gross profit = 830700-321840 = $508860

4) Ending inventory = $95040