Question

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FIFO Perpetual Inventory The beginning inventory at Dunne Co. and data on purchases and sales for...

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 25 $1,200 $30,000
8 Purchase 75 1,240 93,000
11 Sale 40 2,000 80,000
30 Sale 30 2,000 60,000
May 8 Purchase 60 1,260 75,600
10 Sale 50 2,000 100,000
19 Sale 20 2,000 40,000
28 Purchase 80 1,260 100,800
June 5 Sale 40 2,250 90,000
16 Sale 25 2,250 56,250
21 Purchase 35 1,264 44,240
28 Sale 44 2,250 99,000

Required:

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.

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.

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

5. Based upon the preceding data, would you expect the ending inventory using the A method of inventory costing based on the assumption that the most recent inventory costs should be charged against revenue.last-in, first-out method to be higher or lower?

Solutions

Expert Solution

Solution 1:

Computation of ending inventory COGS under FIFO - Dunne Co
Date Beginning Inventory Purchase Cost of Goods Sold Ending Inventory
Qty Rate Amount Qty Rate Amount Qty Rate Amount Qty Rate Amount
3-Apr 25 $1,200.00 $30,000.00 0 $0.00 $0.00 0 $0.00 $0.00 25 $1,200.00 $30,000.00
8-Apr 25 $1,200.00 $30,000.00 75 $1,240.00 $93,000.00 0 $0.00 $0.00 25 $1,200.00 $30,000.00
75 $1,240.00 $93,000.00
11-Apr 25 $1,200.00 $30,000.00 0 $0.00 $0.00 25 $1,200.00 $30,000.00 60 $1,240.00 $74,400.00
75 $1,240.00 $93,000.00 15 $1,240.00 $18,600.00
30-Apr 60 $1,240.00 $74,400.00 0 $0.00 $0.00 30 $1,240.00 $37,200.00 30 $1,240.00 $37,200.00
8-May 30 $1,240.00 $37,200.00 60 $1,260.00 $75,600.00 0 $0.00 $0.00 30 $1,240.00 $37,200.00
60 $1,260.00 $75,600.00
10-May 30 $1,240.00 $37,200.00 0 $0.00 $0.00 30 $1,240.00 $37,200.00 40 $1,260.00 $50,400.00
60 $1,260.00 $75,600.00 20 $1,260.00 $25,200.00
19-May 40 $1,260.00 $50,400.00 0 $0.00 $0.00 20 $1,260.00 $25,200.00 20 $1,260.00 $25,200.00
28-May 20 $1,260.00 $25,200.00 80 $1,260.00 $100,800.00 0 $0.00 $0.00 20 $1,260.00 $25,200.00
80 $1,260.00 $100,800.00
5-Jun 20 $1,260.00 $25,200.00 0 $0.00 $0.00 20 $1,260.00 $25,200.00 60 $1,260.00 $75,600.00
80 $1,260.00 $100,800.00 20 $1,260.00 $25,200.00
16-Jun 60 $1,260.00 $75,600.00 0 $0.00 $0.00 25 $1,260.00 $31,500.00 35 $1,260.00 $44,100.00
21-Jun 35 $1,260.00 $44,100.00 35 $1,264.00 $44,240.00 0 $0.00 $0.00 35 $1,260.00 $44,100.00
35 $1,264.00 $44,240.00
28-jun 35 $1,260.00 $44,100.00 0 $0.00 $0.00 35 $1,260.00 $44,100.00 26 $1,264.00 $32,864.00
35 $1,264.00 $44,240.00 9 $1,264.00 $11,376.00
Total 249 $310,776.00 26 $32,864.00

Solution 2:

Computation of Sales
Date Sales Qty Selling Price Sale Value
11-Apr 40 $2,000.00 $80,000.00
30-Apr 30 $2,000.00 $60,000.00
10-May 50 $2,000.00 $100,000.00
19-May 20 $2,000.00 $40,000.00
5-Jun 40 $2,250.00 $90,000.00
16-Jun 25 $2,250.00 $56,250.00
28-Jun 44 $2,250.00 $99,000.00
Total 249 $525,250.00
Journal Entries
Date Debit Credit
30-Jun Accounts Receivables Dr $525,250.00
            To Sale Revenue $525,250.00
(To record sales revenue)
30-Jun Cost of goods sold Dr $310,776.00
            To Inventory $310,776.00
(Being inventories sold transferred to cost of goods sold account)

Solution 3:

Gross profit = Sales - COGS = $525,250 - $310,776 = $214,474

Solution 5:

As prices are increasing in nature, therefore ending inventory using LIFO method to be lower than ending inventory using FIFO.


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