Question

Altira Corporation provides the following information related to its merchandise inventory during the month of August 2021:

Aug.1	Inventory on hand—3,600 units; cost $7.70 each.
8	Purchased 18,000 units for $7.10 each.
14	Sold 14,400 units for $13.60 each.
18	Purchased 10,800 units for $6.60 each.
25	Sold 13,400 units for $12.60 each.
28	Purchased 5,600 units for $5.80 each.
31	Inventory on hand—10,200 units.

Required:
1. Using calculations based on a perpetual inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using the FIFO method.

Perpetual FIFO: Cost of Goods Available for Sale Cost of Goods Sold - August 14 Cost of Goods Sold - August 25 Inventory Balance # of units Cost per unit Cost of Goods Available for Sale # of units sold Cost per unit Cost of Goods Sold # of units sold Cost per unit Cost of Goods Sold Total Cost of Goods Sold # of units in ending inventory Cost per unit Ending Inventory Beg. Inventory 3,600 $7.70 $27,720 $7.70 $7.70 $0 $7.70 $0 Purchases: August 8 18,000 7.10 127,800 7.10 7.10 7.10 0 August 18 10,800 6.60 71,280 6.60 0 6.60 6.60 August 28 5,600 5.80 32,480 5.80 0 5.80 5.80 Total 38,000 $259,280 0 $0 0 $0 $0 0 $0

Answer 1

Ans.
	FIFO:	Cost of goods available for sale			Cost of goods sold - August -14			Cost of goods sold - August -25			Ending inventory - Periodic FIFO
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beg. Inv.	3600	$7.70	$27,720	3600	$7.70	$27,720				0	$7.70	$0
	Purchases:										0
	8-Aug	18000	$7.10	$127,800	10800	$7.10	$76,680	7200	$7.10	$51,120	0	$7.10	$0
	18-Aug	10800	$6.60	$71,280				6200	$6.60	$40,920	4600	$6.60	$30,360
	28-Aug	5600	$5.80	$32,480							5600	$5.80	$32,480
	Total	38000		$259,280	14400		$104,400	13400		$92,040	10200		$62,840
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
	For August - 14 sales : 3600 units sold from beginning inventory and remaining 10,800 (i.e. 14,400 - 3,600 = 10,800)
	units sold from purchase of 8 August.
	For August - 25 sales : 7200 units (i.e. 18,000 - 10,800 = 7,200) sold from August 8 purchase and remaining
	10,800 (i.e. 13,400 - 7,200 = 6,200) units sold from purchase of 18 August.
	Ending inventory   =   Units available for sale - Units sold
		Units available (a)	Units sold on August 18 (b)		Units sold on August 25 ©		Units in ending inventory (a-b-c)
	Beg. Inv.	3600	3600				0
	Purchases:
	8-Aug	18000	10800		7200		0
	18-Aug	10800			6200		4600
	28-Aug	5600					5600
	Total	38000	14400		13400		10200