Question

Beginning inventory, purchases, and sales data for DVD players are as follows: November 1 Inventory 46 units at $50 10 Sale 36 units 15 Purchase 24 units at $52 20 Sale 17 units 24 Sale 9 units 30 Purchase 23 units at $55 The business maintains a perpetual inventory system, costing by the first in, first-out method a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under Firo, 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 Cost of the Goods Sold Schedule First-in, First-out Method DVD Players Cost of Cost of Quantity Purchases Purchases Quantity Goods Sold Goods Sold Inventory Inventory Inventory Purchased Unit Cost Total Cost Sold Date Unit Cost Total Cost Quantity Unit Cost Total Cost Nov. 1 Nov. 10

Answer 1

Part a:

Date Quantity Purchase Purchase Purchased Unit Cost Total Costs Quantity Sold Cost of Cost of Goods Sold Goods Sold Unit Cost Total Cost Inventory Inventory Quantity Unit Cost Inventory Total Cost Nov-01 46 50 2300 Nov-10 36 50 1800 10 50 500 Nov-15 24 52 1248 10 50 500 1248 24 52 Nov-20 10 50 500 17 52 884 7 52 364 Nov-24 9 52 468 8 52 416 Nov-30 23 55 1265 8 416 52 55 23 1265

Part b:

Answer: Inventory would be lower

Explanations:

It can be observed from the data that the price per unit is increasing with the time and the price for the older stock of goods is lower as compared to the recent purchases. Hence, if the Last in first out method is used thent the inventory cost would be lower and the cost of goods sold would be higher.

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