The beginning inventory at Funky Party Supplies and data on purchases and sales
ID: 2492803 • Letter: T
Question
The beginning inventory at Funky Party Supplies and data on purchases and sales for a three-month period ending March 31, 2016, are as follows:
Date
Transaction
Number of Units
Per Unit
Total
Exhibit 4
Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower?
Date
Transaction
Number of Units
Per Unit
Total
Jan. 1 Inventory 2,500 $70.00 $175,000 10 Purchase 8,000 78.00 624,000 28 Sale 3,800 140.00 532,000 30 Sale 1,250 140.00 175,000 Feb. 5 Sale 500 140.00 70,000 10 Purchase 17,000 80.00 1,360,000 16 Sale 9,100 145.00 1,319,500 28 Sale 8,700 145.00 1,261,500 Mar. 5 Purchase 14,300 81.60 1,166,880 14 Sale 9,800 145.00 1,421,000 25 Purchase 3,000 82.00 246,000 30 Sale 7,900 145.00 1,145,500 FIFO 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 first-in, first-out method. Inventory Cost of Merchandise Sold Purchases Date Total Cost Quantity Unit Cost Unit Cost Total Cost Total Cost Quantity Unit Cost Quantity 2016 Jan. 1 10 10 30 Feb. 5 10 10 16 16 Mar. 5 25 31 BalancesExplanation / Answer
1) FIFO METHOD Date PURCHASES COST OF MERCHANDISE SOLD INVENTORY 2016 quantity unit cost total cost quantity unit cost total cost quantity unit cost total cost 1-Jan 2500 70.0 175000 10-Jan 8000 78.0 624000 2500 70.0 175000 8000 78.0 624000 28-Jan 2500 70.0 175000 1300 78.0 101400 6700 78.0 522600 30-Jan 1250 78.0 97500 5450 78.0 425100 5-Feb 500 78.0 39000 4950 78.0 386100 10-Feb 17000 80.0 1360000 4950 78.0 386100 17000 80.0 1360000 16-Feb 4950 78.0 386100 4150 80.0 332000 12850 80.0 1028000 28-Feb 8700 80.0 696000 4150 80.0 332000 5-Mar 14300 81.6 1166880 4150 80.0 332000 14300 81.6 1166880 14-Mar 4150 80.0 332000 5650 81.6 461040 8650 81.6 705840 25-Mar 3000 82.0 246000 8650 81.6 705840 3000 82.0 246000 30-Mar 7900 81.6 644640 750 81.6 61200 3000 82.0 246000 42300 3396880 41050 3264680 2) Total Sales: date quantity rate value 28-Jan 3800 140 532000 30-Jan 1250 140 175000 5-Feb 500 140 70000 16-Feb 9100 145 1319500 28-Feb 8700 145 1261500 14-Mar 9800 145 1421000 30-Mar 7900 145 1145500 41050 5924500 Total cost of merchandise sold = 3264680 (total of value of merchandise sold--shown in 1 above. Date Account Title & Explanations Debit Credit 31-Mar Merchandise inventory 3396880 Accounts payable 3396880 (purchases made on account) 31-Mar Accounts receivable 5924500 Sales 5924500 (sales made on account) 31-Mar Cost of merchandise sold 3264680 Merchandise inventory 3264680 (cost of goods sold recorded) 3) Gross profit for the period = 5924500-3264680 = 2659820 4) Ending inventory cost = 750 81.6 61200 3000 82 246000 307200 5) The inventory value using LIFO would be lower than the inventory value under FIFO
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