Question

FIFO 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 54 $225 $12,150 8 Purchase 108 270 29,160 11 Sale 72 750 54,000 30 Sale 45 750 33,750 May 8 Purchase 90 300 27,000 10 Sale 54 750 40,500 19 Sale 27 750 20,250 28 Purchase 90 330 29,700 June 5 Sale 54 790 42,660 16 Sale 72 790 56,880 21 Purchase 162 360 58,320 28 Sale 81 790 63,990 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

Dunne Co.
Schedule of Cost of Goods Sold FIFO Method For the Three Months Ended June 30
Date	Purchases			Cost of Goods Sold			Inventory
	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
3-Apr	54	225	12,150				54	225	12,150
8-Apr	108	270	29,160				54	225	12,150
8-Apr							108	270	29,160
8-Apr							162		41,310
11-Apr				54	225	12,150
11-Apr				18	270	4,860	90	270	24,300
30-Apr				45	270	12,150	45	270	12,150
8-May	90	300	27,000				45	270	12,150
8-May							90	300	27,000
8-May							135		39,150
10-May				45	270	12,150
10-May				9	300	2,700	81	300	24,300
19-May				27	300	8,100	54	300	16,200
28-May	90	330	29,700				54	300	2,700
28-May							90	330	29,700
28-May							144		32,400
5-Jun				54	300	16,200	90	330	29,700
16-Jun				72	330	23,760	18	330	5,940
21-Jun	162	360	58,320				18	330	5,940
							162	360	58,320
							180		64,260
28-Jun				18	330	5,940
28-Jun				63	360	22,680	99	360	35,640
30-Jun							99	360	35,640
	504		156,330	405		120,690	99		35,640

Journal entries to record the Sales ad cost:

Total Sales during the period:

	Qty	Selling price	Sales
11-Apr	72	750	54,000
30-Apr	45	750	33,750
10-May	54	750	40,500
19-May	27	750	20,250
5-Jun	54	790	42,660
16-Jun	72	790	56,880
28-Jun	81	790	63,990
Total Sales			312,030

Accounts Receivable acount			312,030
To Sales account				312,030
(To record sales n account)
Cost of Goods Sold account Dr			120,690
To Inventory				120,690

(To record cost of goods sold)

Note COGS amount is derived from the schedule above, sum of items sold and the respective cost at which they were originally purchased.

Gross Profit
Sales	312,030
less: COGS	120,690
Gross Profit	191,340

Ending Inventory from the schedule above is 99 units, valued at the last purchase rate $360 per unit = $35,640

If the company followed LIFO, since the purchase prices are in an inreasing trend, the gross profit would have been lower as well as the ending inventory since it would be valued at the earlier purchase rates of $270 and $225