Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data fo

Question

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for portable DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.

a. 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.

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

June 1 Inventory 60 units @ $68 6 Sale 46 units 14 Purchase 24 units @ $71 19 Sale 18 units 25 Sale 12 units 30 Purchase 25 units @ $74

Explanation / Answer

8

25

71

74

568

1850

b)since price is showing Increasing trend ,latest inventory are sold first under LIFO ,so units remaining in inventory are from old purchase which are at lower prices.so Inventory will be lower than FIFO under LIFO.

Date Quantity Purchased Purchases Unit Cos 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 june 1 60 68 4080 6 46 68 3128 (60-46)=14 68 952 14 24 71 1704 14 68 952 24 71 1704 19 14 68 952 - - - 4 71 284 (24-4)=20 71 1420 25 12 71 852 (20-12)=8 71 568 30 25 74 1850 8 71 568 25 74 1850 30 Balances

8

25

71

74

568

1850

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