Question

Question 1 Gabbins Company uses the perpetual inventory system and the FIFO cost formula. Purchases Sales Selling Unit Cost $50 $60 Units Price Units Beginning inventory Purchase Mar 100 1 3 60 Sales Purchase Sales Sales Sales $100 4 70 $70 10 200 $110 16 80 $110 19 80 $110 25 50 Purchase $75 30 Instructions a) Using the inventory and sales data above, calculate the value assigned to cost of goods sold in March and to the ending inventory at March 31. b) Prepare the journal entries to record the sales on March 4 and March 19. All sales are made on credit. 40

Answer 1

Answer to part (a)
Total cost of goods sold in March is $17,000
Cost of ending inventory in hand in March is $ 8,600
80 units @ $70
40 units @ $ 75
Answer to part (b)
In the books of Gabbins Company
Journal Entries
Date	Description	Debit	Credit
Mar-04	Accounts Receivable	$      7,000
	Sales		$      7,000
	(being sales recorded)
Mar-04	Cost of goods sold	$      3,500
	Merchandise inventory		$      3,500
	(being cost of goods sold recorded)
Mar-19	Accounts Receivable	$      8,800
	Sales		$      8,800
	(being sales recorded)
Mar-19	Cost of goods sold	$      5,500
	Merchandise inventory		$      5,500
	(being cost of goods sold recorded)

Working-
Inventory record under FIFO method
	Purchases			Sale			Cost of goods sold			Inventory in hand
Date	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost
Mar-01										100	50	5000
Mar-03	60	60	3600							100	50	5000
										60	60	3600
Mar-04				70	100	7000	70	50	3500	30	50	1500
										60	60	3600
										30	50	1500
Mar-10	200	70	14000							60	60	3600
										200	70	14000
Mar-16				80	110	8800	30	50	1500	10	60	600
							50	60	3000	200	70	14000
Mar-19				80	110	8800	10	60	600
							70	70	4900	130	70	9100
Mar-25				50	110	5500	50	70	3500	80	70	5600
Mar-30	40	75	3000							80	70	5600
										40	75	3000
Total			20600			30100			17000	120		8600