Question

FIFO Perpetual Inventory

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	60		$225		$13,500
8		Purchase	120		270		32,400
11		Sale	80		750		60,000
30		Sale	50		750		37,500
May 8		Purchase	100		300		30,000
10		Sale	60		750		45,000
19		Sale	30		750		22,500
28		Purchase	100		330		33,000
June 5		Sale	60		790		47,400
16		Sale	80		790		63,200
21		Purchase	180		360		64,800
28		Sale	90		790		71,100

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.

Dunne Co. Schedule of Cost of Goods Sold FIFO Method For the Three Months Ended June 30
	Purchases			Cost of Goods Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Apr. 3								$	$
Apr. 8		$	$
Apr. 11					$	$
Apr. 30
May 8
May 10
May 19
May 28
June 5
June 16
June 21
June 28
June 30	Balances					$			$

-- 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

-- Determine the gross profit from sales for the period.
$______

-- Determine the ending inventory cost as of June 30.
$____________

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

Answer 1

Dunne Co.
Schedule of Cost of Goods Sold
FIFO Method
For the Three Months Ended June 30
	Purchases			Cost of Goods Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Apr. 3							60	$     225	$      13,500
Apr. 8	120	$     270	$ 32,400				60	$     225	$      13,500
							120	$     270	$      32,400
Apr. 11				60	$     225	$ 13,500	100	$     270	$      27,000
				20	$     270	$    5,400
Apr. 30				50	$     270	$ 13,500	50	$     270	$      13,500
May-08	100	$     300	$ 30,000				50	$     270	$      13,500
							100	$     300	$      30,000
May-10				50	$     270	$ 13,500	90	$     300	$      27,000
				10	$     300	$    3,000
May-19				30	$     300	$    9,000	60	$     300	$      18,000
May-28	100	$     330	$ 33,000				60	$     300	$      18,000
							100	$     330	$      33,000
Jun-05				60	$     300	$ 18,000	100	$     330	$      33,000
Jun-16				80	$     330	$ 26,400	20	$     330	$        6,600
Jun-21	180	$     360	$ 64,800				20	$     330	$        6,600
							180	$     360	$      64,800
Jun-28				20	$     330	$    6,600	110	$     360	$      39,600
				70	$     360	$ 25,200
Jun-30	Balances					$134,100			$      39,600

	Units	Multiply: unit Selling price	Sales revenue
Sale	80	$        750	$    60,000
Sale	50	$        750	$    37,500
Sale	60	$        750	$    45,000
Sale	30	$        750	$    22,500
Sale	60	$        790	$    47,400
Sale	80	$        790	$    63,200
Sale	90	$        790	$    71,100
Total Sales revenue			$ 346,700
Less: Cost of Goods sold			$ 134,100
Gross Profit			$ 212,600
Ending inventory cost as of June 30			$    39,600
Ending inventory using the last-in, first-out method to be			Lower
During the Price rising period, Ending inventory under the LIFO method is lower then Ending inventory under FIFO method. Because of older unit cost allocated to Ending inventory under the LIFO method.

Journal entries
Date	General Journal	Debit	Credit
	Account receivable	$ 346,700
	Sales revenue		$ 346,700
	(To record sales revenue.)
	Cost of goods sold	$ 134,100
	Inventory		$ 134,100
	(To record cost of goods sold.)