In: Accounting
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?
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.