Question

 PR 7-1A FIFO perpetual inventory 

The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31 are as follows:

Date		Transaction	Number of Units		Per Unit		Total
Jan. 1		Inventory	7,500		$75.00		$562,500
10		Purchase	22,500		85.00		1,912,500
28		Sale	11,250		150.00		1,687,500
30		Sale	3,750		150.00		562,500
Feb. 5		Sale	1,500		150.00		225,000
10		Purchase	54,000		87.50		4,725,000
16		Sale	27,000		160.00		4,320,000
28		Sale	25,500		160.00		4,080,000
Mar. 5		Purchase	45,000		89.50		4,027,500
14		Sale	30,000		160.00		4,800,000
25		Purchase	7,500		90.00		675,000
30		Sale	26,250		160.00		4,200,000

Instructions

 1. Record the inventory, purchases, and cost of mer inventory record similar to the one illustrate method.

 2 Determine the total sales and the total cost of nalize the entries in the sales and cost of me sales were on account.

 3. Determine the gross profit from sales for the period of merchandise sold for the period. Jour- of merchandise sold accounts. Assume that all

Answer 1

Solution 1:

Computation of ending inventory COGS under FIFO - Midnight Supplies
Date	Beginning Inventory			Purchase			Cost of Goods Sold			Ending Inventory
	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount	Qty	Rate	Amount
1-Jan	7500	$75.00	$562,500.00	0	$0.00	$0.00	0	$0.00	$0.00	7500	$75.00	$562,500.00
10-Jan	7500	$75.00	$562,500.00	22500	$85.00	$1,912,500.00	0	$0.00	$0.00	7500	$75.00	$562,500.00
										22500	$85.00	$1,912,500.00
28-Jan	7500	$75.00	$562,500.00	0	$0.00	$0.00	7500	$75.00	$562,500.00	18750	$85.00	$1,593,750.00
	22500	$85.00	$1,912,500.00				3750	$85.00	$318,750.00
30-Jan	18750	$85.00	$1,593,750.00	0	$0.00	$0.00	3750	$85.00	$318,750.00	15000	$85.00	$1,275,000.00
5-Feb	15000	$85.00	$1,275,000.00	0	$0.00	$0.00	1500	$85.00	$127,500.00	13500	$85.00	$1,147,500.00
10-Feb	13500	$85.00	$1,147,500.00	54000	$87.50	$4,725,000.00	0	$0.00	$0.00	13500	$85.00	$1,147,500.00
										54000	$87.50	$4,725,000.00
16-Feb	13500	$85.00	$1,147,500.00	0	$0.00	$0.00	13500	$85.00	$1,147,500.00	40500	$87.50	$3,543,750.00
	54000	$87.50	$4,725,000.00				13500	$87.50	$1,181,250.00
28-Feb	40500	$87.50	$3,543,750.00	0	$0.00	$0.00	25500	$87.50	$2,231,250.00	15000	$87.50	$1,312,500.00
5-Mar	15000	$87.50	$1,312,500.00	45000	$89.50	$4,027,500.00	0	$0.00	$0.00	15000	$87.50	$1,312,500.00
										45000	$89.50	$4,027,500.00
14-Mar	15000	$87.50	$1,312,500.00	0	$0.00	$0.00	15000	$87.50	$1,312,500.00	30000	$89.50	$2,685,000.00
	45000	$89.50	$4,027,500.00				15000	$89.50	$1,342,500.00
25-Mar	30000	$89.50	$2,685,000.00	7500	$90.00	$675,000.00	0	$0.00	$0.00	30000	$89.50	$2,685,000.00
										7500	$90.00	$675,000.00
30-mar	30000	$89.50	$2,685,000.00	0	$0.00	$0.00	26250	$89.50	$2,349,375.00	3750	$89.50	$335,625.00
	7500	$90.00	$675,000.00							7500	$90.00	$675,000.00
Total							125250		$10,891,875.00	11250		$1,010,625.00

Solution 2:

Computation of Sales
Date	Sales Qty	Selling Price	Sale Value
28-Jan	11250	$150.00	$1,687,500.00
30-Jan	3750	$150.00	$562,500.00
5-Feb	1500	$150.00	$225,000.00
16-Feb	27000	$160.00	$4,320,000.00
28-Feb	25500	$160.00	$4,080,000.00
14-Mar	30000	$160.00	$4,800,000.00
30-Mar	26250	$160.00	$4,200,000.00
Total	125250		$19,875,000.00

Cost of merchandise sold = $10,891,875

Journal Entries
Date		Debit	Credit
31-Mar	Accounts Receivables Dr	$19,875,000.00
	To Sale Revenue		$19,875,000.00
	(To record sales revenue)
31-Mar	Cost of goods sold Dr	$10,891,875.00
	To Inventory		$10,891,875.00
	(Being inventories sold transferred to cost of goods sold account)

Solution 3:

Gross profit = Sales - COGS = $19,875,000 - $10,891,875 = $8,983,125