Question

1. Perpetual Inventory Using FIFO

   Beginning inventory, purchases, and sales data for DVD players are as follows:

   November 1		Inventory	56 units at $97
   10		Sale	44 units
   15		Purchase	27 units at $101
   20		Sale	17 units
   24		Sale	14 units
   30		Purchase	21 units at $106

   The business maintains a perpetual inventory system, costing by the first-in, first-out method.

   a. Determine the cost of the goods 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 Goods Sold Unit Cost column and in the Inventory Unit Cost column.

   Cost of the Goods Sold Schedule
   First-in, First-out Method
   DVD Players
   Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Goods Sold Unit Cost	Cost of Goods Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
   Nov. 1								$	$
   Nov. 10					$	$
   Nov. 15		$	$
   Nov. 20
   Nov. 24
   Nov. 30
   Nov. 30	Balances					$			$

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

Check My Work

Answer 1

Solution: A
	FIFO METHOD
			PURHASES	COST OF GOODS SOLD	ENDING INVENTORY
	Date	Particulars	Units	Rate	Total Cost	Units	Rate	Total Cost	Units	Rate	Total Cost
	Nov. 01	Beginning inventory							56	$         97.00	$         5,432
	Nov. 10	Sales				44	$             97.00	$           4,268	12	$         97.00	$         1,164
	Nov. 15	Purchases	27	$                   101.00	$                   2,727				12	$         97.00	$         1,164
									27	$      101.00	$         2,727
	Nov.20	Sales				12	$             97.00	$           1,164
						5	$          101.00	$               505	22	$      101.00	$         2,222
	Nov.24	Sales				14	$          101.00	$           1,414	8	$      101.00	$            808
	Nov.30	Purchases	21	$                   106.00	$                   2,226				8	$      101.00	$            808
									21	$      106.00	$         2,226
		Total	48		$4,953	75		$7,351	29		$         3,034
Solution: B
	As per Last in First out method inventory should be at lower because last purchase at higher cost is taken in cost of goods sold
	Answer = Lower