Question

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 The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases. to be higher or lower?

none

X

FIFO

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

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none

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Chart of Accounts

CHART OF ACCOUNTS
Dunne Co.
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	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

none

X

Journal

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

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4

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Final Questions

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

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Explanation

4. Determine the ending inventory cost on June 30, 2016.

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Explanation

5. Based upon the preceding data, would you expect the inventory using the last-in, first-out method

The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases.

to be higher or lower?

Higher

Lower

Answer 1

Due to time constrain could provide this much only