Question

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	72		$225		$16,200
8		Purchase	144		270		38,880
11		Sale	96		750		72,000
30		Sale	60		750		45,000
May 8		Purchase	120		300		36,000
10		Sale	72		750		54,000
19		Sale	36		750		27,000
28		Purchase	120		330		39,600
June 5		Sale	72		790		56,880
16		Sale	96		790		75,840
21		Purchase	216		360		77,760
28		Sale	108		790		85,320

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.

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.

Answer 1

Solution 1:

Computation of ending inventory COGS under FIFO
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
3-Apr	72	$225.00	$16,200.00	0	$0.00	$0.00	0	$0.00	$0.00	72	$225.00	$16,200.00
8-Apr	72	$225.00	$16,200.00	144	$270.00	$38,880.00	0	$0.00	$0.00	72	$225.00	$16,200.00
										144	$270.00	$38,880.00
11-Apr	72	$225.00	$16,200.00	0	$0.00	$0.00	72	$225.00	$16,200.00	120	$270.00	$32,400.00
	144	$270.00	$38,880.00				24	$270.00	$6,480.00
30-Apr	120	$270.00	$32,400.00	0	$0.00	$0.00	60	$270.00	$16,200.00	60	$270.00	$16,200.00
8-May	60	$270.00	$16,200.00	120	$300.00	$36,000.00	0	$0.00	$0.00	60	$270.00	$16,200.00
										120	$300.00	$36,000.00
10-May	60	$270.00	$16,200.00	0	$0.00	$0.00	60	$270.00	$16,200.00	108	$300.00	$32,400.00
	120	$300.00	$36,000.00				12	$300.00	$3,600.00
19-May	108	$300.00	$32,400.00	0	$0.00	$0.00	36	$300.00	$10,800.00	72	$300.00	$21,600.00
28-May	72	$300.00	$21,600.00	120	$330.00	$39,600.00	0	$0.00	$0.00	72	$300.00	$21,600.00
										120	$330.00	$39,600.00
5-Jun	72	$300.00	$21,600.00	0	$0.00	$0.00	72	$300.00	$21,600.00	120	$330.00	$39,600.00
	120	$330.00	$39,600.00
16-Jun	120	$330.00	$39,600.00	0	$0.00	$0.00	96	$330.00	$31,680.00	24	$330.00	$7,920.00
21-Jun	24	$330.00	$7,920.00	216	$360.00	$77,760.00	0	$0.00	$0.00	24	$330.00	$7,920.00
										216	$360.00	$77,760.00
28-Jun	24	$330.00	$7,920.00	0	$0.00	$0.00	24	$330.00	$7,920.00	132	$360.00	$47,520.00
	216	$360.00	$77,760.00				84	$360.00	$30,240.00
Total									$160,920.00			$47,520.00

Solution 2:

Computation of Sales
Date	Sales Qty	Selling Price	Sale Value
11-Apr	96	$750.00	$72,000.00
30-Apr	60	$750.00	$45,000.00
10-May	72	$750.00	$54,000.00
19-May	36	$750.00	$27,000.00
5-Jun	72	$790.00	$56,880.00
16-Jun	96	$790.00	$75,840.00
28-Jun	108	$790.00	$85,320.00
Total	540		$416,040.00

Total cost of merchandise sold = $160,920

Journal Entries - Dunne Co.
Particulars	Debit	Credit
Accounts Receivables Dr	$416,040.00
To Sale Revenue		$416,040.00
(Being sales recorded for the quarter)
Cost of merchandise sold Dr	$160,920.00
To Inventory		$160,920.00
(Being inventories sold transferred to cost of merchandise sold account)