Question

Perpetual Inventory Using FIFO

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

Apr. 1		Inventory	56 units @ $52
10		Sale	43 units
15		Purchase	24 units @ $55
20		Sale	22 units
24		Sale	11 units
30		Purchase	29 units @ $58

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 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

a) FIFO METHOD

Date	Quantity Purchased	Unit cost	Purchase cost	Quantity sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory quantity	Inventory unit cost	nventory Total Cost
Apr 1							56	52	2912
Apr 10				43	52	2236	13	52	676
Apr 15	24	55	1320				13 24	52 55	676 1320
Apr 20				13 9	52 55	676 495	15	55	825
Apr 24				11	55	605	4	55	220
Apr 30	29	58	1682				4 29	55 58	220 1682
Apr 31	Balances					4012			1902

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

Inventory will be lower if using last in first out method.