Question

1. Perpetual Inventory Using FIFO

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

   Apr. 1		Inventory	41 units @ $82
   10		Sale	30 units
   15		Purchase	18 units @ $87
   20		Sale	16 units
   24		Sale	10 units
   30		Purchase	30 units @ $91

   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

Schedule of cost of goods merchandise

Date	Quantity purchased	Unit cost	Purchase cost	Quantity sold	Unit cost	Cost of goods sold	Quantity on hand	Unit cost	Ending inventory
Ap 1							41	82	3362
Apr 10				30	82	2460	11	82	902
Apr 15	18	87	1566				11 18	82 87	902 1566
apr 20				11 5	82 87	902 435	13	87	1131
apr 24				10	87	870	3	87	261
apr 30	30	91	2730				3 30	87 91	261 2730
apr 30	Balances					4667			2991

cost of merchandise sold = $4667; Ending inventory = $2991

b) If we use last in first out method then ending inventory is lower than FIFO