Question

FIFO Perpetual Inventory

The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30 are as follows:

Date

Transaction

Number of Units

Per Unit

Total

Apr. 3		Inventory	36		$375		$13,500
8		Purchase	72		450		32,400
11		Sale	48		1,250		60,000
30		Sale	30		1,250		37,500
May 8		Purchase	60		500		30,000
10		Sale	36		1,250		45,000
19		Sale	18		1,250		22,500
28		Purchase	60		550		33,000
June 5		Sale	36		1,315		47,340
16		Sale	48		1,315		63,120
21		Purchase	108		600		64,800
28		Sale	54		1,315		71,010

Required:

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the first-in, first-out method. 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.

Dunne Co. Schedule of Cost of Merchandise Sold FIFO Method For the three-months ended June 30
	Purchases			Cost of Merchandise Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Apr. 3								$	$
Apr. 8		$	$
Apr. 11					$	$
Apr. 30
May 8
May 10
May 19
May 28
June 5
June 16
June 21
June 28
June 30	Balances					$			$

2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account.

Record sale
Record cost

3. Determine the gross profit from sales for the period.
$

4. Determine the ending inventory cost as of June 30.
$

5. Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower?

Answer 1

Answer is given below

Date April 3 April 8 Opening balance Purchase Total Cost $13,500 $13,500 $32,400 72 April 11 Sale April 30 Sale Purchase Dunne Co. Schedule of Cost of Merchandise Sold FIFO Method For the three-months ended June 30 Purchase Cost of Merchandise sold Inventory Unit Total Unit Total Unit Quantity Quantity Cost Cost Cost Quantity Cost Cost $375 $450 $32,400 $375 $450 $375 $13,500 12 $450 $5,400 60 $450 $450 $13,500 $450 $500 $30,000 $450 60 $500 $450 $13,500 $500 $3,000 54 $500 18 $500 $9,000 36 $500 60 $550 $33,000 $500 $550 36 $500 $18,000 $550 48 $550 $26,400 12 $550 108 $600 $64,800 $550 108 $600 12 $550 $6,600 $600 $25,200 66 $600 300 $160,200 270 $134,100 66 $27,000 $13,500 $13,500 $30,000 May 8 May 10 Sale 30 May 19 May 28 Sale Purchase $27,000 $18,000 $18,000 $33,000 $33,000 $6,600 $6,600 $64,800 June 5 June 16 June 21 Sale Sale Purchase June 28 Sale $39,600 $39,600 June 30 Balances Total Sales Cost of goods sold $346,470 $134,100 Date Credit Debit $346,470 $346,470 Account title and explanation Accounts Receivable To Sales (To record sales) Cost of goods sold To Inventory (To record Cost of goods sold) $134,100 $134,100 3 Total Sales Cost of goods sold Gross profit $346,470 $134,100 $212,370 Ending inventory June 30 4 $39,600 5 Ending inventory would be lower value under LIFO method Working note: Opening stock Add: Purchase $13,500 $160,200 $173,700 $39,600 $134,100 Less: Closing stock Cost of Goods sold Units April 11 Sale April 30 Sale May 10 Sale May 19 Sale June 5 Sale June 16 Sale June 28 Sale Selling price $1,250 $1,250 $1,250 $1,250 $1,315 $1,315 $1,315 Total Sales $60,000 $37,500 $45,000 $22,500 $47,340 $63,120 $71,010 $346,470 Total Sales