Question

FIFO Perpetual Inventory

The beginning inventory at Dunne Co. and data on purchases and sales for a three-month period ending June 30 are as follows:

Date		Transaction	Number of Units		Per Unit		Total
Apr. 3		Inventory	90		$525		$47,250
8		Purchase	180		630		113,400
11		Sale	120		1,750		210,000
30		Sale	75		1,750		131,250
May 8		Purchase	150		700		105,000
10		Sale	90		1,750		157,500
19		Sale	45		1,750		78,750
28		Purchase	150		770		115,500
June 5		Sale	90		1,840		165,600
16		Sale	120		1,840		220,800
21		Purchase	270		840		226,800
28		Sale	135		1,840		248,400

Required:

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the first-in, first-out method. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

Dunne Co. Schedule of Cost of Goods Sold FIFO Method For the Three Months Ended June 30
	Purchases			Cost of Goods Sold			Inventory
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Apr. 3								$	$
Apr. 8		$	$
Apr. 11					$	$
Apr. 30
May 8
May 10
May 19
May 28
June 5
June 16
June 21
June 28
June 30	Balances					$			$

2. Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account. If an amount box does not require an entry, leave it blank.

Record sale
Record cost

3. Determine the gross profit from sales for the period.
$

4. Determine the ending inventory cost as of June 30.
$

5. Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?

Answer 1

(1)

Date Transaction 3-Apr Inventory 8-Apr Purchase 11-Apr Sale 30-Apr Sale 8-May Purchase 10-May Sale FIFO method Purchase Cost of goods sold Inventory Quantity Price Amount Quantity Price Amount Quantity Price Amount 90 S 525 $ 47,250 1801 s 630 S 113,400 90 $ 525 S 47,250 180 $ 630$ 113,400 90 $ 525 $ 47,250 301 $ 630$ 18,900 150 $ 630 $ 94,500 75 S 630S 47,250 75$ 630 $ 47,250 150 S 700 $ 105,000 75 S 630$ 47,250 150 S 700 S 105,000 75 S 630S 47,250 15$ 700 S 10,500 135 S 700 $ 94,500 45 $ 700 S 90 $ 700$ 63,000 150 $ 770 $ 115,500 90 $ 700$ 63,000 150 $ 770 S 115,500 90S 700 S 150 $ 770 S 115,500 120$ 770 S 92,400 30$ 770 $ 23,100 2701 S 840 $ 226,800 30 S 770 S 23,100 270 $ 840 S 226,800 30$ 770 S 23,100 105 S 840 S 88,200 165 $ 840 S 138,600 675 $ 469,350 165 $ 840 $ 138,600 31 500 19-May Sale 28-May Purchase 5-Jun Sale 16-Jun Sale 21-Jun Purchase 28-Jun Sale Balance

(2)

Date Quantity 11-Apr 30-Apr 10-May 19-May 5-Jun 16-Jun 28-Jun Total sales Sales details Rate Amount 120 $ 1,750 $ 210,000 75 $ 1,750 $ 131,250 90 $ 1,750 $ 157,500 45$ 1,750 $ 78,750 90 $ 1,840 $ 165,600 120 $ 1,840 $ 220,800 135 $ 1,840 $ 248,400 $1,212,300

Journal Date Particular Debit Credit 8-Apr Inventory $ 113,400 Accounts payable $ 113,400 11-Apr Cost of goods sold $ 66,150 Accounts receivable $ 210,000 Inventory $ 66,150 Sales $ 210,000 30-Apr Cost of goods sold $ 47,250 Accounts receivable $ 131,250 Inventory $ 47,250 Sales $ 131,250 8-May Inventory $ 10,500 Accounts payable $ 10,500 10-May Cost of goods sold $ 57,750 Accounts receivable $ 157,500 Inventory $ 57,750 Sales $ 157,500 19-May Cost of goods sold $ 31,500 Accounts receivable $ 78,750 Inventory $ 31,500 Sales $ 78,750 28-May Inventory $ 115,500 Accounts payable $ 115,500 5-Jun Cost of goods sold $ 63,000 Accounts receivable $ 165,600 Inventory $ 63,000 Sales $ 165,600 16-Jun Cost of goods sold $ 92,400 Accounts receivable $ 220,800 Inventory $ 92,400 Sales $ 220,800 21-Jun Inventory $ 226,800 Accounts payable $ 226,800 28-Jun cost of goods sold $ 111,300 Accounts receivable $ 248,400 Inventory $ 111,300 Sales $ 248,400 $

(3)

gross profit = total sales - cost of goods sold

gross profit = $1,212,300 - $469,350

gross profit = $742,950

(4)

value of ending inventory = $138,600 for 165 units of inventory. This is available in the FIFO table in part 2

(5)

In last in first out method the goods which are bought latest are sold first.

As the per unit cost of goods is increasing the goods available in last in first out at the end will be of lower value as earlier purchases will be instock which are of lower cost.

Hence the value of ending inventory is expected to be lower in LIFO when compared to FIFO.