Question

1. Beginning inventory, purchases, and sales data for portable game players are as follows:

   Apr. 1		Inventory	180 units at $40
   10		Sale	140 units
   15		Purchase	210 units at $42
   20		Sale	170 units
   24		Sale	60 units
   30		Purchase	240 units at $46

   The business maintains a perpetual inventory system, costing by the first-in, first-out method.

   a. 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. 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.

   Perpetual Inventory Account First-in, First-out Method Portable Game Players
   Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Cost of Merchandise 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 ending inventory to be higher or lower using the last-in, first-out method?

Answer 1

a. 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. 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.

Perpetual Inventory Account First-in, First-out Method Portable Game Players
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Cost of Merchandise Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
Apr. 1							180	40	7200
Apr. 10				140	40	5600	40	40	1600
Apr. 15	210	42	8820				40	40	1600
							210	42	8820
Apr. 20				40	40	1600
				130	42	5460	80	42	3360
Apr. 24				60	42	2520	20	42	840
Apr. 30	240	46	11040				20	42	840
							240	46	11040
Apr. 30	Balances					15180			11880

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

Under LIFO method ending inventory will be lower