Question

The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows:

Date		Transaction	Number of Units	Per Unit	Total
Jan.	1	Inventory	2,600	$54.00	$140,400
	10	Purchase	7,000	62.00	434,000
	28	Sale	3,850	108.00	415,800
	30	Sale	1,300	108.00	140,400
Feb.	5	Sale	500	108.00	54,000
	10	Purchase	17,500	64.00	1,120,000
	16	Sale	8,700	113.00	983,100
	28	Sale	8,600	113.00	971,800
Mar.	5	Purchase	14,000	65.60	918,400
	14	Sale	10,100	113.00	1,141,300
	25	Purchase	3,300	66.00	217,800
	30	Sale	7,750	113.00	875,750

	Instructions
1.	Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3 , using the first-in, first-out method.
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 and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.
3.	Determine the gross profit from sales for the period.
4.	Determine the ending inventory cost as of March 31.
5.	Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?

CHART OF ACCOUNTS
Midnight Supplies
General Ledger
ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Office Equipment 192 Accumulated Depreciation-Office Equipment 193 Store Equipment 194 Accumulated Depreciation-Store Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Insurance Expense 534 Office Supplies Expense 535 Rent Expense 536 Repairs Expense 537 Selling Expenses 538 Store Supplies Expense 561 Depreciation Expense-Office Equipment 562 Depreciation Expense-Store Equipment 590 Miscellaneous Expense 710 Interest Expense

1. Record the inventory, purchases, and cost of goods 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.

Date	Purchases			Cost of Goods Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jan. 1
10
10
28
28
30
Feb. 5
10
10
16
16
28
Mar. 5
5
14
14
25
25
30
30
31	Balances

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 and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.

Question not attempted.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

Score: 0/51

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

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

4. Determine the ending inventory cost as of March 31.

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

Lower

Higher

Answer 1

1.

MIDNIGHT SUPPLIES
Schedule of Cost of Goods Sold
FIFO Method
For The Three Months Ended March 31
Date	Purchases	Cost of Goods sold	Ending Inventory
Qty	Unit Cost	Total	Qty	Unit Cost	Total	Qty	Unit Cost	Total
Jan-01							2,600.00	54.00	140,400.00
Jan-10	7,000.00	62.00	434,000.00				2,600.00	54.00	140,400.00
Jan-10							7,000.00	62.00	434,000.00
Jan-28				2,600.00	54.00	140,400.00
Jan-28				1,250.00	62.00	77,500.00	5,750.00	62.00	356,500.00
Jan-30				1,300.00	62.00	80,600.00	4,450.00	62.00	275,900.00
Feb-05				500.00	62.00	31,000.00	3,950.00	62.00	244,900.00
Feb-10	17,500.00	64.00	1,120,000.00				3,950.00	62.00	244,900.00
Feb-10							17,500.00	64.00	1,120,000.00
Feb-16				3,950.00	62.00	244,900.00
Feb-16				4,750.00	64.00	304,000.00	12,750.00	64.00	816,000.00
Feb-28				8,600.00	64.00	550,400.00	4,150.00	64.00	265,600.00
Mar-05	14,000.00	65.60	918,400.00				4,150.00	64.00	265,600.00
Mar-05							14,000.00	65.60	918,400.00
Mar-14				4,150.00	64.00	265,600.00
Mar-14				5,950.00	65.60	390,320.00	8,050.00	65.60	528,080.00
Mar-25	3,300.00	66.00	217,800.00				8,050.00	65.60	528,080.00
Mar-25							3,300.00	66.00	217,800.00
Mar-30				7,750.00	65.60	508,400.00	300.00	65.60	19,680.00
Mar-30							3,300.00	66.00	217,800.00
Mar-31	Balances			2,593,120.00	3,600.00		237,480.00

2.

	Debit	Credit
Accounts Receivable	4,582,150.00
Sales		4,582,150.00
Cost of Goods Sold	2,593,120.00
Inventory		2,593,120.00

3.

Gross Profit = 4,582,150 - 2,593,120

=1,989,030

4.3,600 Units Amount - 237,480

5.In last in first out inventory prices will be lower as prices are at increasing trend