Question

1. Perpetual Inventory Using A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue.LIFO

   Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:

   Inventory		Purchases		Sales
   May 1	2,900 units at $32	May 10	1,450 units at $34	May 12	2,030 units
   		May 20	1,305 units at $36	May 14	1,740 units
   				May 31	870 units

   a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

   Schedule of Cost of Merchandise Sold
   LIFO Method
   Prepaid Cell Phones
   Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
   May 1								$	$
   May 10		$	$
   May 12					$	$
   May 14
   May 20
   May 31
   May 31	Balances					$			$

   b. Based upon the preceding data, would you expect the inventory to be higher or lower using the The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.first-in, first-out method?
   

   • Higher
   • Lower

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Answer 1

a
Schedule of Cost of Merchandise Sold
LIFO Method
Prepaid Cell Phones
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
May 1							2900	32	92800
May 10	1450	34	49300				2900	32	92800
							1450	34	49300
May 12				1450	34	49300	2320	32	74240
				580	32	18560
May 14				1740	32	55680	580	32	18560
May 20	1305	36	46980				580	32	18560
							1305	36	46980
May 31				870	36	31320	580	32	18560
							435	36	15660
May 31	Balances					154860			34220
b
Inventory would be higher under first-in, first-out method.