Question

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for portable DVD players are as follows:

Apr. 1		Inventory	80 units @ $71
10		Sale	55 units
15		Purchase	46 units @ $75
20		Sale	32 units
24		Sale	23 units
30		Purchase	36 units @ $78

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3.

a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

Cost of the Merchandise Sold Schedule
First-in, First-out Method
Portable DVD Players
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Cost of Merchandise Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
Apr. 1								$	$
Apr. 10					$	$
Apr. 15		$	$
Apr. 20
Apr. 24
Apr. 30
Apr. 30	Balances					$			$

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

Answer 1

Cost of the Merchandise Sold Schedule
First-in, First-out Method
Portable DVD Players
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Cost of Merchandise Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
Apr. 1							80	71	5680
Apr. 10				55	71	3905	25	71	1775
Apr. 15	46	75	3450				25	71	1775
							46	75	3450
Apr. 20				25	71	1775	39	75	2925
				7	75	525
Apr. 24				23	75	1725	16	75	1200
Apr. 30	36	78	2808				16	75	1200
							36	78	2808
Apr. 30	Balances					7930			4008
b
	Inventory would be lower using the last-in, first-out method.