Question

Beginning inventory, purchases, and sales for Item Copper are as follows:

Mar.	1	Inventory	450 units at $7
	9	Sale	390 units
	13	Purchase	410 units at $8
	25	Sale	340 units

Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on March 25 and (b) the inventory on March 31.

Answer 1

As given,

Mar1   Inventory   450 units at $7
Mar9   Sale   390 units
Mar13   Purchase   410 units at $8
Mar25   Sale   340 units

(a) the cost of merchandise sold on March 25

Let us calculate,

First Inventory - First Sale:
Mar 1 (450)- Mar 9 (390) units = 60 units * $7 price
= $420
On Mar 25, there is another sale of 340 units.
So that, Mar 25 (340) units - 60 units(remianing units after first sale = 280 units *$8
= $2240

So the cost of merchandise sold on March 25 = $2240 + $420
= $2660

b) the inventory on March 31.

First let us calculate left incentory.
Left inventory = Mar 1 (450)- Mar 9 (390) units
= 60 units
So, the inventory on March 31 = purchase - left inventory
=Mar 13(410)units - 60units
= 350 units

So the inventory is = 350 * $8
= $2880