Question

The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31, are as follows:

Date		Transaction	Number of Units	Per Unit	Total
Jan.	1	Inventory	7,500	$75.00	$562,500
	10	Purchase	22,500	85.00	1,912,500
	28	Sale	11,250	150.00	1,687,500
	30	Sale	3,750	150.00	562,500
Feb.	5	Sale	1,500	150.00	225,000
	10	Purchase	54,000	87.50	4,725,000
	16	Sale	27,000	160.00	4,320,000
	28	Sale	25,500	160.00	4,080,000
Mar.	5	Purchase	45,000	89.50	4,027,500
	14	Sale	30,000	160.00	4,800,000
	25	Purchase	7,500	90.00	675,000
	30	Sale	26,250	160.00	4,200,000
	Instructions
1.	Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3 , 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 March 31. 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 as of March 31.
5.	Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower?

The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31, are as follows:

Date		Transaction	Number of Units		Per Unit	Total
Jan.	1	Inventory	7,500		$75.00	$562,500
	10	Purchase	22,500		85.00	1,912,500
	28	Sale	11,250		150.00	1,687,500
	30	Sale	3,750		150.00	562,500
Feb.	5	Sale	1,500		150.00	225,000
	10	Purchase	54,000		87.50	4,725,000
	16	Sale	27,000		160.00	4,320,000
	28	Sale	25,500		160.00	4,080,000
Mar.	5	Purchase	45,000		89.50	4,027,500
	14	Sale	30,000		160.00	4,800,000
	25	Purchase	7,500		90.00	675,000
	30	Sale	26,250		160.00	4,200,000
	Instructions
1.	Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3 , 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 March 31. 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 as of March 31.
5.	Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower?
CHART OF ACCOUNTS
Midnight Supplies
General Ledger
ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Office Equipment 192 Accumulated Depreciation-Office Equipment 193 Store Equipment 194 Accumulated Depreciation-Store Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary 3. Determine the gross profit from sales for the period. 4. Determine the ending inventory cost as of March 31. 5. Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower? Higher Lower 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. Date Purchases Cost of Merchandise Sold Inventory Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Jan. 1 10 10 28 28 30 Feb. 5 10 10 16 16 28 Mar. 5 5 14 14 25 25 30 30 31 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 March 31. Refer to the Chart of Accounts for exact wording of account titles. PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4				REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Insurance Expense 534 Office Supplies Expense 535 Rent Expense 536 Repairs Expense 537 Selling Expenses 538 Store Supplies Expense 561 Depreciation Expense-Office Equipment 562 Depreciation Expense-Store Equipment 590 Miscellaneous Expense 710 Interest Expense

Answer 1

Date	Purchase			Sales			Cost of Merchandise Sold(COMS)			Inventory
	Units	Price	Amount	Unit	Price	Amt	Unit	Price	Amt	Unit	Price	Amt
Jan1	-	-	-	-	-	-	-	-	-	7500	75	562500
Jan 10	22500	85	1912500	-	-	-	-	-	-	7500	75	562500
										22500	85	1912500
Jan 28	-	-	-	11250	150	1687500	7500	75	562500	18750	85	1593750
							3750	85	318750
Jan 30	-	-	-	3750	150	562500	3750	85	318750	15000	85	1275000
Feb 5	-	-	-	1500	150	225000	1500	85	127500	13500	85	1147500
Feb 10	54000	87.50	4725000	-	-	-	-	-	-	13500	85	1147500
										54000	87.50	4725000
Feb 16	-	-	-	27000	160	4320000	13500	85	1147500	40500	87.50	3543750
							13500	87.50	1181250
Feb 28	-	-	-	25500	160	4080000	25500	87.50	2231250	15000	87.50	1312500
Mar 05	45000	89.50	4027500	-	-	-	-	-	-	15000	87.50	1312500
										45000	89.50	4027500
Mar 14	-	-	-	30000	160	4800000	15000	87.50	1312500	30000	89.50	2685000
							15000	89.50	1342500
Mar 25	7500	90	675000	-	-	-	-	-	-	30000	89.50	2685000
										7500	90.00	675000
Mar 30	-	-	-	26250	160	4200000	26250	89.50	2349375	3750	89.50	335625
										7500	90.00	675000
Total	129000		11340000	125250		19875000	125250		10891875	11250		1010625

Total Sales = $ 19875000 (125250 Units) From above table

Cost of merchandise Sold = $10891875 (125250 Units) From Above Table

Journal Entries for sales & COMS

Date	Account	Debit	Credit
Jan 20	A/c Receivable (A/c Rec.)	1687500
	Sales		1687500
Jan 30	A/c Rec	562500
	Sales		562500
Feb 05	A/c Rec	225000
	Sales		225000
Feb 16	A/c Rec	4320000
	Sales		4320000
Feb 28	A/c Rec	4080000
	Sales		4080000
Mar 14	A/c Rec	48000000
	Sales		4800000
Mar 30	A/c Rec	4200000
	Sales		4200000
Mar 31	COMS	11902500
	Inventory		562500
	Purchase		11340000
Mar 31	Inventory	1010625
	COMS		1010625

Gross Profit = Sales - cost of merchadise sold (COMS)

Gross Profit = 19875000 - 10891875

Gross Profit = $8983125

Ending Inventory = (3750 x 89.50) + (7500 x 90.00)

Ending Inventory = 335625 + 675000 = $1010625

Answer 5   

Because as per data the cost of purchase are in increamental manner through out the period so we may believe that cost of ending inventory as per LIFO method will be less in comparision of FIFO method because low prices goods will be in stock on ending day i.e. March 31

So above is the answers to the problems.