Question

FIFO perpetual inventory

The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30, 2016, 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

	Instructions
1.	Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the first-in, first-out method.
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, and date your journal entry June 30. Refer to the Chart of Accounts for exact wording of account titles.
3.	Determine the gross profit from sales for the period.
4.	Determine the ending inventory cost on June 30, 2016.
5.	Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower? 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the first-in, first-out method. Date Purchases Cost of Merchandise Sold Inventory 2016 Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Apr. 3 8 8 11 11 30 May 8 8 10 10 19 28 28 Jun. 5 5 16 21 21 28 28 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, and date your journal entry June 30. Refer to the Chart of Accounts for exact wording of account titles. PAGE 1 JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 2 3 4 3. Determine the gross profit from sales for the period. 4. Determine the ending inventory cost on June 30, 2016. 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

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD
	RECIEPTS			COST OF GOODS SOLD			BALANCE
DATE	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $	UNITS	RATE	AMOUNT $
3-Apr							25	1200	30000
8-Apr	75	1240	93000				25	1200	30000
							75	1240	93000
11-Apr				25	1200	30000
				15	1240	18600	60	1240	74400
30-Apr				30	1240	37200	30	1240	37200
8-May	60	1260	75600				30	1240	37200
							60	1260	75600
10-May				30	1240	37200
				20	1260	25200	40	1260	50400
19-May				20	1260	25200	20	1260	25200
28-May	80	1260	100800				100	1260	126000
5-Jun				40	1260	50400	60	1260	75600
16-Jun				25	1260	31500	35	1260	44100
21-Jun	35	1264	44240				35	1260	44100
							35	1264	44240
28-Jun				35	1260	44100
				9	1264	11376	26	1264	32864
TOTAL	250		313640	249		310776	26		32864
Journal entries:
Accounts receivable Dr.			525250
Sales revenue				525250
Cost of Goods sold Dr.			310776
Inventory				310776
Gross profit:
Sales revenue		525250
Less: COGS		310776
Gross profit:		214474
Ending inventory of 26 units:    $ 32864 Req 5: Inventory as per LIFO would have been lower due to rising prices