EX 7-3 Perpetual inventory using FIFO OBJ. 2, 3 nin 8 inventory, purchases, and

Question

EX 7-3 Perpetual inventory using FIFO OBJ. 2, 3 nin 8 inventory, purchases, and sales data for portable game players are as follows: 120 units at $26 Apr. 1 10 15 20 24 30 Inventory Sale Purchase Sale Sale Purchase 90 units 140 units at $28 110 units 40 units 160 units at $30 The business maintains a perpetual inventory system, costing by the first-in, first-our method. a. Determine the cost of the merchandise sold for each sale and the inventory balano x after each sale, presenting the data in the form illustrated in Exhibit 3. b. Based upon the preceding data, would you expect the inventory to be higher or low using the last-in, first-out method? EX 74 Dannsni

Explanation / Answer

Requirement b:

Since prices are inflating, the inventory balance under FIFO will be higher when compared to the inventory balance under LIFO. This is because of the reason that the recently bought inventory will remain in stock under FIFO giving higher balance.

Hence, we ccan expect the inventory to be lower using the last in first out (LIFO).

Requirement a: Determination of Cost of merchandise sold and Inventory balance under FIFO: Date Beginning Inventory Purchases Sales Ending Inventory Quantity Value p.u Total Value Quantity Cost p.u Total Cost Quantity Cost p.u Total Cost Quantity Value p.u Total Value Apr-01 120 26 3120 120 26 3120 Apr-10 120 26 3120 90 26 2340 30 26 780 Apr-15 30 26 780 140 28 3920 30 26 780 140 28 3920 Apr-20 30 26 780 30 26 780 60 28 1680 140 28 3920 80 28 2240 Apr-24 60 28 1680 40 28 1120 20 28 560 Apr-30 20 28 560 160 30 4800 20 28 560 160 30 4800 300 8720 240 6480

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