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

Question

Beginning inventory, purchases, and sales data for portable DVD players are as follows: June 1 Inventory 61 units @$65 6 Sale 49 units 14 Purchase 26 units @$68 19 Sale 21 units 25 Sale 7 units 30 Purchase 25 units @ $71 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. Enter all amounts as positive numbers. 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

Explanation / Answer

Instructions

Calculating LIFO
1

Download the price and unit list of the products currently in the company's inventory. The price list will include the number of units purchased and the prices at which the units were purchased. The information will be ranked according to date of purchase; the units purchased most recently will be at the top of the list.
2

Determine the number of units sold from inventory. Multiply the prices the company paid for the most recent units by the number of units sold to determine LIFO cost of goods sold.

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3

Suppose the company purchased 100 units of inventory for $5 on January 1, 200 units for $8 on March 1 and 100 units for $10 on June 1. Further suppose that the company sold 350 units on August 1. The LIFO cost of goods sold for these units will equal (100 x $10) + (200 x $8) + (50 x $5) = $2,850. The value of units remaining in inventory according to LIFO equals (100 x $5) + (200 x $8) + (100 x $10) - $2,850 = $250.

Calculating FIFO
4

Download the same price and unit list of the products currently in the company's inventory, and rank the information according to date so that the most recent inventory purchases are at the top of the list.
5

Determine the number of units sold from inventory. Multiply the prices the company paid for the oldest units by the number of units sold to determine the FIFO cost of goods sold.
6

Suppose the company purchased 100 units of inventory for $5 on January 1, 200 units for $8 on March 1 and 100 units for $10 on June 1. Further suppose that the company sold 350 units on August 1. The FIFO cost of goods sold for these units will equal (100 x $5) + (200 x $8) + (50 x $10) = $2,600. The value of units remaining in inventory according to FIFO equals (100 x $5) + (200 x $8) + (100 x $10) - $2,600 = $500.

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