Question

FIFO Perpetual Inventory

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	36		$225		$8,100
8		Purchase	72		270		19,440
11		Sale	48		750		36,000
30		Sale	30		750		22,500
May 8		Purchase	60		300		18,000
10		Sale	36		750		27,000
19		Sale	18		750		13,500
28		Purchase	60		330		19,800
June 5		Sale	36		790		28,440
16		Sale	48		790		37,920
21		Purchase	108		360		38,880
28		Sale	54		790		42,660

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.

Dunne Co. Schedule of Cost of Merchandise Sold FIFO Method For the three months ended May 31, 2016
	Purchases			Cost of Merchandise 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 merchandise sold for the period. Journalize the entries in the sales and cost of merchandise 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 inventory using the last-in, first-out method to be higher or lower?

Check My Work1 more Check My Work uses remaining.

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	36	$225.00	$8,100.00	0	$0.00	$0.00	0	$0.00	$0.00	36	$225.00	$8,100.00
8-Apr	36	$225.00	$8,100.00	72	$270.00	$19,440.00	0	$0.00	$0.00	36	$225.00	$8,100.00
										72	$270.00	$19,440.00
11-Apr	36	$225.00	$8,100.00	0	$0.00	$0.00	36	$225.00	$8,100.00	60	$270.00	$16,200.00
	72	$270.00	$19,440.00				12	$270.00	$3,240.00
30-Apr	60	$270.00	$16,200.00	0	$0.00	$0.00	30	$270.00	$8,100.00	30	$270.00	$8,100.00
8-May	30	$270.00	$8,100.00	60	$300.00	$18,000.00	0	$0.00	$0.00	30	$270.00	$8,100.00
										60	$300.00	$18,000.00
10-May	30	$270.00	$8,100.00	0	$0.00	$0.00	30	$270.00	$8,100.00	54	$300.00	$16,200.00
	60	$300.00	$18,000.00				6	$300.00	$1,800.00
19-May	54	$300.00	$16,200.00	0	$0.00	$0.00	18	$300.00	$5,400.00	36	$300.00	$10,800.00
28-May	36	$300.00	$10,800.00	60	$330.00	$19,800.00	0	$0.00	$0.00	36	$300.00	$10,800.00
										60	$330.00	$19,800.00
5-Jun	36	$300.00	$10,800.00	0	$0.00	$0.00	36	$300.00	$10,800.00	60	$330.00	$19,800.00
16-Jun	60	$330.00	$19,800.00	0	$0.00	$0.00	48	$330.00	$15,840.00	12	$330.00	$3,960.00
21-Jun	12	$330.00	$3,960.00	108	$360.00	$38,880.00	0	$0.00	$0.00	12	$330.00	$3,960.00
										108	$360.00	$38,880.00
28-Jun	12	$330.00	$3,960.00	0	$0.00	$0.00	12	$330.00	$3,960.00	66	$360.00	$23,760.00
	108	$360.00	$38,880.00				42	$360.00	$15,120.00
Total							270		$80,460.00	66		$23,760.00

Solution 2:

Computation of Sales
11-Apr	48	$750.00	$36,000.00
30-Apr	30	$750.00	$22,500.00
10-May	36	$750.00	$27,000.00
19-May	18	$750.00	$13,500.00
5-Jun	36	$790.00	$28,440.00
16-Jun	48	$790.00	$37,920.00
28-Jun	54	$790.00	$42,660.00
Total	270		$208,020.00

Journal Entries
Particulars	Debit	Credit
Accounts Receivables Dr	$208,020.00
To Sale Revenue		$208,020.00
(Being sales recorded for the quarter)
Cost of merchandise sold Dr	$80,460.00
To Inventory		$80,460.00
(Being inventories sold transferred to cost of merchandise sold account)

Solution 3:

Gross profit from sales = Sales - COGS = $208,020 - $80,460 = $127,560

Solution 4:

Ending inventory cost as of June 30 = $23,760

Solution 5:

As prices are increaseing over the period, therefore inventory using last in first out method to be lower.