LIFO Perpetual Inventory The beginning inventory of merchandise at Keats Office
ID: 2475750 • 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.
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
Ending inventory = 88 units @ 840 = $68880
Cost of goods sold = $255360
Sales =64*1750+40*1750+48*1750+24*1750+48*1840+64*1840+72*1840 = $646560
Gross profit = sales - COGS = $646560 - $255360 = $391200
Date Goods Purchased Cost of goods sold Inventory Balance No. Of units Cost perunit Total purchase price no. Of units cost per unit cost of goods sold no of units cost per unit ($) inventory balance Mar-03 48 @ 525.00 = 25200 Mar-08 96 @ 630 60480 96 @ 630.00 = 60480 Total & Balance 144 85680 Mar-11 64 @ 630 = 40320 48 @ 525.00 = 25200 32 @ 630.00 = 20160 Total & Balance 96 60480 64 40320 80 45360 Mar-30 32 @ 630 = 20160 40 @ 525.00 = 21000 8 @ 525 = 4200 Total & Balance 96 60480 104 64680 40 21000 Apr-08 80 @ 700 56000 80 @ 700.00 = 56000 Total & Balance 176 116480 104 64680 120 77000 Apr-10 48 @ 700 = 33600 40 @ 525.00 = 21000 32 @ 700.00 = 22400 Total & Balance 176 116480 152 98280 72 43400 Apr-19 24 @ 700 = 16800 40 @ 525.00 = 21000 8 @ 700.00 = 5600 Total & Balance 176 116480 176 115080 48 26600 Apr-28 80 @ 770 61600 80 @ 770.00 = 61600 Total & Balance 256 178080 176 115080 128 88200 May-05 48 @ 770 = 36960 40 @ 525.00 = 21000 8 @ 700.00 = 5600 32 @ 770.00 = 24640 Total & Balance 256 178080 224 152040 80 51240 May-16 32 @ 770 = 24640 8 @ 700 = 5600 24 @ 525 = 12600 16 @ 525.00 = 8400 Total & Balance 256 178080 288 194880 16 8400 May-21 144 @ 840 120960 144 @ 840 = 120960 Total & Balance 400 299040 288 194880 160 129360 May-28 72 @ 840 = 60480 16 @ 525 = 8400 72 @ 840 = 60480 Total & Balance 400 299040 360 255360 88 68880Related Questions
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