LIFO Perpetual Inventory The beginning inventory of merchandise at Keats Office
ID: 2475089 • Letter: L
Question
LIFO Perpetual Inventory
The beginning inventory of merchandise at Keats Office Supplies and data on purchases and sales for a three-month period are as follows:
Required:
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 last-in, first-out method. If units are in inventory at two different costs, enter the OLDEST units first.
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
3. Determine the ending inventory cost as of May 31, 2014.
$
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1. When the perpetual inventory system is used, revenue is recorded each time a sale is made along with an entry to record the cost of the merchandise sold. LIFO means the last units purchased are assumed to be the first to be sold. Therefore after each sale, the remaining or ending inventory is made up of the first or earliest purchases. Think of your inventory in terms of "layers." The first sale comes from the most recent purchase layer. When deciding which layer to use for costing of each sale ask yourself: "Is there enough inventory left in the most recent purchase to cover the sale?" If not, the other units sold should be taken from the second most recent purchase layer, which then contains the most recent costs. Continue this process for each transaction. If you have done this problem correctly, the remaining units making up ending inventory will be the March 3 beginning inventory and May 21 unit purchase price.
2. Total sales are obtained by taking the number of units sold times their sale prices for all sales and adding these amounts together. The total cost of merchandise sold can be obtained by adding the LIFO costs in the perpetual inventory record. Sales minus cost of merchandise sold equals gross profit.
3. The ending inventory is what is left after subtracting the cost of goods sold from the goods available for sale. Multiply the units remaining after the last sale by their corresponding earliest layer cost to determine the LIFO cost of the ending inventory.
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LIFO Perpetual Inventory
The beginning inventory of merchandise at Keats Office Supplies and data on purchases and sales for a three-month period are as follows:
Date Transaction Numberof Units Per Unit Total March 3 Inventory 48 $525 $25,200 8 Purchase 96 630 60,480 11 Sale 64 1,750 112,000 30 Sale 40 1,750 70,000 April 8 Purchase 80 700 56,000 10 Sale 48 1,750 84,000 19 Sale 24 1,750 42,000 28 Purchase 80 770 61,600 May 5 Sale 48 1,840 88,320 16 Sale 64 1,840 117,760 21 Purchase 144 840 120,960 28 Sale 72 1,840 132,480
Required:
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 last-in, first-out method. If units are in inventory at two different costs, enter the OLDEST units first.
Keats Office SuppliesSchedule of Cost of Merchandise Sold
LIFO Method
For the three months ended May 31, 2014 Purchases Cost of Merchandise Sold Inventory Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Mar. 3 $ $ Mar. 8 $ $ Mar. 11 $ $ Mar. 30 Apr. 8 Apr. 10 Apr. 19 Apr. 28 May 5 May 16 May 21 May 28 May 31 Balances $ $
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
Total sales $ Total cost of merchandise sold Gross profit from sales $3. Determine the ending inventory cost as of May 31, 2014.
$
Explanation / Answer
1) Purchases Cost of merchandise sold Closing stock Date Quantity Unit Cost Total Cost Quantity Unit cost Total Cost Quantity Unit cost Total Cost 3-Mar 48 525 25200 48 525 25200 8-Mar 96 630 60480 48 525 25200 96 630 60480 11-Mar 48 525 25200 80 630 50400 16 630 10080 30-Mar 40 630 25200 40 630 25200 8-Apr 80 700 56000 40 630 25200 80 700 56000 10-Apr 40 630 25200 8 700 5600 72 700 50400 19-Apr 24 700 16800 48 700 33600 28-Apr 80 770 61600 48 700 33600 80 770 61600 5-May 48 700 33600 80 770 61600 16-May 64 770 49280 16 770 12320 21-May 144 840 120960 16 770 12320 144 840 120960 28-May 16 770 12320 56 840 47040 88 840 73920 Total 250320 2) Total Sales Quantity Unit Sales Sales 64 1750 112000 40 1750 70000 48 1750 84000 24 1750 42000 48 1840 88320 64 1840 117760 72 1840 132480 Total Sales 646560 Cost of goods sold 250320 Gross Profit 396240 3) Cost of closing inventory 73920 (88* 840)
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