Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data fo
ID: 2446166 • Letter: P
Question
Perpetual Inventory Using FIFO
Beginning inventory, purchases, and sales data for portable DVD players are as follows:
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 4.
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.
b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
Higher or Lower
June 1 Inventory 46 units @ $83 6 Sale 35 units 14 Purchase 22 units @ $88 19 Sale 19 units 25 Sale 7 units 30 Purchase 20 units @ $93Explanation / Answer
It is difficult to fill the values in the table you mentioned as if there are units sold from inventory whicha re in two different price points , It is difficult to show there. I explain clearly in below:
1 jun: Begining Inventory=$3,818(46*83)
6 Jun: cost of goods sold=$2,905 (35*83) and closin inventory is (46-35)*83=$913
14 Jun: Purchase 22 units =$1,936 (22*88) and total inventory now= $(913+1936)=$2,849
19th Jun : COGS of 19 units =(11*83)+(8*88)= $1617 . Here 11 units comes from closing inventory of Jun 6th and rest from purchase of 14th jun . The closing inventory is (14*88)=$1,232 as out of 22units purchased from 14th jun 8 sold in 19th jun and 14 left
25th Jun: COGS of 5 units= (5*88)=$440 and the closing inventory is (14-5)*88=$792
30th Jun: purchase of 20 units @ 93 =(20*93)=$1,860. The closing inventory is( 792+1860)=$2,652
B)Let us calculate the closing invenory value as per LIFO
Here till Jun 14 nothing ill change and both will be same.
1 jun: Begining Inventory=$3,818(46*83)
6 Jun: cost of goods sold=$2,905 (35*83) and closin inventory is (46-35)*83=$913
14 Jun: Purchase 22 units =$1,936 (22*88) and total inventory now= $(913+1936)=$2,849
19 Jun:19 units sold and these come from goods purchased from 14th Jun. COGS is (19*88)=$1672. The closing inventory is =((22-19)*88)+ $913=$1,177
25 jun: Here 7 units sold and COGS is (3*88)+(4*83)=$596 and the ending inventory is (7*83)=$581
30 jun: purchase of 20 units @ 93 =(20*93)=$1,860. The closing inventory is( 581+1860)=$2,441.
In LIFO the closing inventory is lesser than FIFO.
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