In: Accounting
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 | 7,500 | $ 75.00 | $ 562,500 |
10 | Purchase | 22,500 | 85.00 | 1,912,500 | |
28 | Sale | 11,250 | 150.00 | 1,687,500 | |
30 | Sale | 3,750 | 150.00 | 562,500 | |
Feb. | 5 | Sale | 1,500 | 150.00 | 225,000 |
10 | Purchase | 54,000 | 87.50 | 4,725,000 | |
16 | Sale | 27,000 | 160.00 | 4,320,000 | |
28 | Sale | 25,500 | 160.00 | 4,080,000 | |
Mar. | 5 | Purchase | 45,000 | 89.50 | 4,027,500 |
14 | Sale | 30,000 | 160.00 | 4,800,000 | |
25 | Purchase | 7,500 | 90.00 | 675,000 | |
30 | Sale | 26,250 | 160.00 | 4,200,000 |
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? |
Solution 1:
Computation of ending inventory COGS under FIFO - Midnight Supplies | ||||||||||||
Date | Beginning Inventory | Purchase | Cost of Goods Sold | Ending Inventory | ||||||||
Qty | Rate | Amount | Qty | Rate | Amount | Qty | Rate | Amount | Qty | Rate | Amount | |
1-Jan | 7500 | $75.00 | $562,500.00 | 0 | $0.00 | $0.00 | 0 | $0.00 | $0.00 | 7500 | $75.00 | $562,500.00 |
10-Jan | 7500 | $75.00 | $562,500.00 | 22500 | $85.00 | $1,912,500.00 | 0 | $0.00 | $0.00 | 7500 | $75.00 | $562,500.00 |
22500 | $85.00 | $1,912,500.00 | ||||||||||
28-Jan | 7500 | $75.00 | $562,500.00 | 0 | $0.00 | $0.00 | 7500 | $75.00 | $562,500.00 | 18750 | $85.00 | $1,593,750.00 |
22500 | $85.00 | $1,912,500.00 | 3750 | $85.00 | $318,750.00 | |||||||
30-Jan | 18750 | $85.00 | $1,593,750.00 | 0 | $0.00 | $0.00 | 3750 | $85.00 | $318,750.00 | 15000 | $85.00 | $1,275,000.00 |
5-Feb | 15000 | $85.00 | $1,275,000.00 | 0 | $0.00 | $0.00 | 1500 | $85.00 | $127,500.00 | 13500 | $85.00 | $1,147,500.00 |
10-Feb | 13500 | $85.00 | $1,147,500.00 | 54000 | $87.50 | $4,725,000.00 | 0 | $0.00 | $0.00 | 13500 | $85.00 | $1,147,500.00 |
54000 | $87.50 | $4,725,000.00 | ||||||||||
16-Feb | 13500 | $85.00 | $1,147,500.00 | 0 | $0.00 | $0.00 | 13500 | $85.00 | $1,147,500.00 | 40500 | $87.50 | $3,543,750.00 |
54000 | $87.50 | $4,725,000.00 | 13500 | $87.50 | $1,181,250.00 | |||||||
28-Feb | 40500 | $87.50 | $3,543,750.00 | 0 | $0.00 | $0.00 | 25500 | $87.50 | $2,231,250.00 | 15000 | $87.50 | $1,312,500.00 |
5-Mar | 15000 | $87.50 | $1,312,500.00 | 45000 | $89.50 | $4,027,500.00 | 0 | $0.00 | $0.00 | 15000 | $87.50 | $1,312,500.00 |
45000 | $89.50 | $4,027,500.00 | ||||||||||
14-Mar | 15000 | $87.50 | $1,312,500.00 | 0 | $0.00 | $0.00 | 15000 | $87.50 | $1,312,500.00 | 30000 | $89.50 | $2,685,000.00 |
45000 | $89.50 | $4,027,500.00 | 15000 | $89.50 | $1,342,500.00 | |||||||
25-Mar | 30000 | $89.50 | $2,685,000.00 | 7500 | $90.00 | $675,000.00 | 0 | $0.00 | $0.00 | 30000 | $89.50 | $2,685,000.00 |
7500 | $90.00 | $675,000.00 | ||||||||||
30-mar | 30000 | $89.50 | $2,685,000.00 | 0 | $0.00 | $0.00 | 26250 | $89.50 | $2,349,375.00 | 3750 | $89.50 | $335,625.00 |
7500 | $90.00 | $675,000.00 | 7500 | $90.00 | $675,000.00 | |||||||
Total | 125250 | $10,891,875.00 | 11250 | $1,010,625.00 |
Solution 2:
Computation of Sales | |||
Date | Sales Qty | Selling Price | Sale Value |
28-Jan | 11250 | $150.00 | $1,687,500.00 |
30-Jan | 3750 | $150.00 | $562,500.00 |
5-Feb | 1500 | $150.00 | $225,000.00 |
16-Feb | 27000 | $160.00 | $4,320,000.00 |
28-Feb | 25500 | $160.00 | $4,080,000.00 |
14-Mar | 30000 | $160.00 | $4,800,000.00 |
30-Mar | 26250 | $160.00 | $4,200,000.00 |
Total | 125250 | $19,875,000.00 |
Journal Entries | |||
Date | Debit | Credit | |
31-Mar | Accounts Receivables Dr | $19,875,000.00 | |
To Sale Revenue | $19,875,000.00 | ||
(To record sales revenue) | |||
31-Mar | Cost of goods sold Dr | $10,891,875.00 | |
To Inventory | $10,891,875.00 | ||
(Being inventories sold transferred to cost of goods sold account) |
Solution 3:
Gross profit = Sales - COGS = $19,875,000 - $10,891,875 = $8,983,125
Solution 4:
Ending inventory cost = $1,010,625
Solution 5:
As prices are rising, ending inventory using LIFO method to be lower.