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Chapter 7 Homework Assignment (part 1)

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Perpetual Inventory Using LIFO

Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:

Inventory		Purchases		Sales
May 1	3,500 units at $32	May 10	1,750 units at $34	May 12	2,450 units
		May 20	1,575 units at $36	May 14	2,100 units
				May 31	1,050 units

a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

Schedule of Cost of Merchandise Sold
LIFO Method
Prepaid Cell Phones
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
May 1								$	$
May 10		$	$
May 12					$	$
May 14
May 20
May 31
May 31	Balances					$			$

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

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Answer 1

a)

Date	Quantity purchase	Unit Cost	Purchase Cost	Quantity Sold	Unit Cost	Cost of goods sold	Ending inventory unit	Unit Cost	Cost of ending inventory
May 1							3500	32	112000
May 10	1750	34	59500				3500 1750	32 34	112000 59500
May 12				1750 700	34 32	59500 22400	2800	32	89600
May 14				2100	32	67200	700	32	22400
May 20	1575	36	56700				700 1575	32 36	22400 56700
May 31				1050	36	37800	700 525	32 36	22400 18900
May 31	Balances					186900			41300

b) Based upon the preceding data inventory would be higher under first in first out method