Question

The beginning inventory of merchandise at Rhodes 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	90		$600		$54,000
8		Purchase	180		720		129,600
11		Sale	120		2,000		240,000
30		Sale	75		2,000		150,000
May 8		Purchase	150		800		120,000
10		Sale	90		2,000		180,000
19		Sale	45		2,000		90,000
28		Purchase	150		880		132,000
June 5		Sale	90		2,100		189,000
16		Sale	120		2,100		252,000
21		Purchase	270		960		259,200
28		Sale	135		2,100		283,500

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 Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

Rhodes Co. Schedule of Cost of Merchandise Sold FIFO Method For the three-months ended June 30
	Purchases			Cost of Merchandise 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					$			$

2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account. If an amount box does not require an entry, leave it blank.

	Description	Post. Ref.	Debit	Credit
Record sale
Record cost

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

4. Determine the ending inventory cost as of June 30.
$

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

Answer 1

1.

	FIFO	Purchases			Cost of Goods Sold			Inventory on hand
Date	Activity	Units	Unit Price	Amount	Units	Unit Price	Amount	Units	Unit Price	Amount
Apr. 3	Beginning Inventory							90	$          600.00	$          54,000
Apr. 8	Purchase	180	$          720.00	$        129,600				90	$          600.00	$          54,000
								180	$          720.00	$        129,600
Apr. 11	Sales				90	$          600.00	$          54,000
					30	$          720.00	$          21,600	150	$          720.00	$        108,000
Apr. 30	Sale				75	$          720.00	$          54,000	75	$          720.00	$          54,000
May. 8	Purchase	150	$          800.00	$        120,000				75	$          720.00	$          54,000
								150	$          800.00	$        120,000
May. 10	Sale				75	$          720.00	$          54,000
					15	$          800.00	$          12,000	135	$          800.00	$        108,000
May. 19	Sale				45	$          800.00	$          36,000	90	$          800.00	$          72,000
May. 28	Purchase	150	$          880.00	$        132,000				90	$          800.00	$          72,000
								150	$          880.00	$        132,000
Jun. 5	Sale				90	$          800.00	$          72,000	150	$          880.00	$        132,000
Jun. 16	Sale				120	$          880.00	$        105,600	30	$          880.00	$          26,400
Jun. 21	Purchase	270	$          960.00	$        259,200				30	$          880.00	$          26,400
								270	$          960.00	$        259,200
Jun. 28	Sale				30	$          880.00	$          26,400
					105	$          960.00	$        100,800	165	$          960.00	$        158,400
	Total	750		$       640,800	675		$       536,400	165		$       158,400

2.

Account Titles	Debit	Credit
Accounts Receivable	$   1,384,500
Sales Revenue		$    1,384,500
(To record sales)
Cost of Goods Sold	$      536,400
Merchandise Inventory		$        536,400
(To record cost of sales)

3. Gross Profit = $1384500-536400 = $848,100

4. Ending Inventory = $158,400

5. Lower