Question

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

Apr. 1		Inventory	40 units @ $46
10		Sale	27 units
15		Purchase	24 units @ $48
20		Sale	17 units
24		Sale	10 units
30		Purchase	26 units @ $50

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

a. Determine the cost of the merchandise 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 Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

Perpetual Inventory Account First-in, First-out Method Portable Game Players
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Cost of Merchandise Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
Apr. 1								$	$
Apr. 10					$	$
Apr. 15		$	$
Apr. 20
Apr. 24
Apr. 30
Apr. 30	Balances					$			$

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

Answer 1

a. Determine the cost of the merchandise 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 Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

Perpetual Inventory Account First-in, First-out Method Portable Game Players
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Cost of Merchandise Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
Apr. 1							40	$46	$1840
Apr. 10				27	$46	$1242	13	46	598
Apr. 15	24	$48	$1152				13	46	598
							24	48	1152
Apr. 20				13	46	598
				4	48	192	20	48	960
Apr. 24				10	48	480	10	48	480
Apr. 30	26	50	1300				10	48	480
							26	50	1300
Apr. 30	Balances					$1270			$1780

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

Ending inventory under LIFO is lower