Question

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:

Inventory		Purchases		Sales
May 1	2,000 units at $33	May 10	1,000 units at $35	May 12	1,400 units
		May 20	900 units at $37	May 14	1,200 units
				May 31	600 units

Assume that the business maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. 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.

Date	Purchases Quantity	Purchases Unit Cost	Purchases Total Cost	Cost of Merchandise Sold Quantity	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
May 1								$	$
May 10		$	$
May 12					$	$
May 14
May 20
May 31
May 31	Balances					$			$

Answer 1

​​​​​​1. () Indicates negative or substracting the amount.

Date 1 Purchase aty Purchasce Total cost Cost of Purchase unit cost cost of Merchandise sold aty cost of Merchandise sold unit Joventory quastity Inventory unit cost Inventory Totaliast sold total 2000 66000 May I May to 1000 M I 35 3 5000 1000 35000 3000 101000 May 12 1400 33 46200 (1400) 846200) 1600 54800 May 14 1200 600x33 600x 35 19800 21000 40800 (1200) (4080o) 14000 May 20 900 37 400 900 33300 37 33000 1300 47000 May 31 600 400x 35 200 x 37 14000 7400 21400 (600) (21400) 700 37 25600

2.As it is FIFO, we are selling the quantity which is first purchased.

3.May 14: 600 quantity was taken from the stock which is @33 as they are purchased first and other 600 quantity is taken from the batch which is @35. Totally 1200 quantity is sold from two different batches.

4.May 31: As mentioned above in the same way 600 Quantity is sold from two different batches. 400 quantity from stock of amount 35 and remaining 200 quantity from stock of amount 37,which is purchased on may 20.