Question

IFO 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	42		$300		$12,600
8		Purchase	84		360		30,240
11		Sale	56		1,000		56,000
30		Sale	35		1,000		35,000
May 8		Purchase	70		400		28,000
10		Sale	42		1,000		42,000
19		Sale	21		1,000		21,000
28		Purchase	70		440		30,800
June 5		Sale	42		1,050		44,100
16		Sale	56		1,050		58,800
21		Purchase	126		480		60,480
28		Sale	63		1,050		66,150

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

Dunne Co. Schedule of Cost of Goods Sold FIFO Method For the Three Months Ended June 30
	Purchases			Cost of Goods 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 goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account.

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 ending 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							42	$          300.00	$          12,600
Apr. 8	Purchase	84	$          360.00	$          30,240				42	$          300.00	$          12,600
								84	$          360.00	$          30,240
Apr. 11	Sales				42	$          300.00	$          12,600
					14	$          360.00	$            5,040	70	$          360.00	$          25,200
Apr. 30	Sale				35	$          360.00	$          12,600	35	$          360.00	$          12,600
May. 8	Purchase	70	$          400.00	$          28,000				35	$          360.00	$          12,600
								70	$          400.00	$          28,000
May. 10	Sale				35	$          360.00	$          12,600
					7	$          400.00	$            2,800	63	$          400.00	$          25,200
May. 19	Sale				21	$          400.00	$            8,400	42	$          400.00	$          16,800
May. 28	Purchase	70	$          440.00	$          30,800				42	$          400.00	$          16,800
								70	$          440.00	$          30,800
Jun. 5	Sale				42	$          400.00	$          16,800	70	$          440.00	$          30,800
Jun. 16	Sale				56	$          440.00	$          24,640	14	$          440.00	$            6,160
Jun. 21	Purchase	126	$          480.00	$          60,480				14	$          440.00	$            6,160
								126	$          480.00	$          60,480
Jun. 28	Sale				14	$          440.00	$            6,160
					49	$          480.00	$          23,520	77	$          480.00	$          36,960
	Total	350		$       149,520	315		$       125,160	77		$          36,960

2.

Account Titles	Debit	Credit
Accounts Receivable	$      323,050
Sales Revenue		$        323,050
(To record sales)
Cost of Goods Sold	$      125,160
Merchandise Inventory		$        125,160
(To record cost of sales)

3. Gross Profit = $323050-125160 = $197890

4. Ending Inventory = $36960

5. Lower