Question

In: Accounting

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

  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?

Solutions

Expert Solution

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


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