Question

In: Accounting

FIFO Perpetual Inventory The beginning inventory of merchandise at Dunne Co. and data on purchases and...

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 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

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.

Dunne Co.
Schedule of Cost of Merchandise Sold
FIFO Method
For a Three-Month Period
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.

Record sale Accounts Receivable
Sales
Record cost Cost of Merchandise Sold
Merchandise Inventory

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

4. Determine the ending inventory cost on 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?
Lower

Solutions

Expert Solution

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
Aril 30 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 1264 32864
Req 2: Journal entries:
Accounts receivable Dr. 525250
       Sales revenue 525250
Cost of goods sold Dr. 310776
       Merchandise inventory 310776
Req 3:
Gross Profit:
Ssales 525250
Less: Cost of g oods sold 310776
Gross Profit: 214474
Req 4: Cost of Ending Inventory:   $ 32864
Req 5:
LOWER, the cost of ending inventory will be lower in LIFO as the ccost of inventory is rising.

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