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.

Cost of the Merchandise Sold Schedule

For June 6, it asks for quantity sold, cost of merchandise sold unit cost, cost of merchandise sold total cost, inventory quantity, inventory unit cost, inventory total cost

For June 14 it asks for quantity purchased, purchases unit cost, purchases total cost, inventory quantity, inventory unit cost, inventory total cost; then spaces under the inventory quantity, inventory unit cost and inventory total cost

For June 19, it asks for quantity sold, cost of merchandise sold unit cost, cost of merchandise sold total cost, inventory quantity, inventory unit cost, inventory total cost; then spaces under the quantity sold, cost of merchandise sold unit cost, cost of merchandise sold total cost

For June 25, it asks for quantity sold, cost of merchandise sold unit cost, cost of merchandise sold total cost, inventory quantity, inventory unit cost, inventory total cost

For June 30, it asks for quantity purchased, purchases unit cost, purchases total cost, inventory quantity, inventory unit cost inventory total cost

June 30 balances for cost of merchandise sold total cost and inventory total cost

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 69 units @ $45 6 Sale 55 units 14 Purchase 36 units @ $47 19 Sale 23 units 25 Sale 16 units 30 Purchase 21 units @ $50

Explanation / Answer

a) First in , First out method -Portable DVD Players Cost of Merchandise Sold Schedule Date Quantity Purchase unit Purchase Quantity Cost of Cost of Inventory Inventory Inventory Purchased Cost Total Cost Sold Merchandise sold Merchandise sold quantity unit cost total cost unit cost total cost 1-Jun 69 45 3105 6-Jun 55 45 2475 14 45 630 14-Jun 36 47 1692 14 45 630 36 47 1692 Total inventory 50 2322 19-Jun 14 45 630 9 47 423 27 47 1269 25-Jun 16 47 752 11 47 517 30-Jun 21 50 1050 11 47 517 21 50 1050 Total inventory 32 1567 b) Under Last in , first out method the inventory cost would be lower as the purchase prices is increasing and the balance of stock left would be of earlier purchase/inventory whose unit cost is lower

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