Question

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales for Item B901 are as follows:

May 1		Inventory	39 units @ $19
9		Sale	30 units
13		Purchase	35 units @ $20
28		Sale	17 units

Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on May 28 and (b) the inventory on May 31.

a. Cost of merchandise sold on May 28	$
b. Inventory on May 31

Answer 1

Under FIFO ,units acquired first are sold first.Also under perpetual inventory system ,inventory records are maintained date wise.

FIFO METHOD
	PURCHASE			COST OF GOODS SOLD			INVENTORY
	Quantity	unit cost	Total	Quantity	unit cost	Total	Quantity	unit cost	Total
May 1							39	19	741
9				30	19	570	39-30=9	19	171
13	35	20	700				9	19	171
							35	20	700
28				9	19	171
				8	20	160	35-8= 27	20	540

May 28 sale of 17 units are made as 9 unit at the rate of $ 19 and remaining 8 units are sold at the rate of $ 20.

A)cost of merchandise sold on May 28 : 171 +160 = 331

B) Inventory on May 3 1 : 27 units at the unit cost of $ 20 = $ 540