The beginning inventory of merchandise at Dunne Co. and data on purchases and sa

Question

The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30, 2016, are as follows:

Date

Exhibit 4

FIFO

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in

Exhibit 4

, using the first-in, first-out method.

Chart of Accounts

Journal

2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account, and date your journal entry June 30. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

1

2

3

4

Final Questions

3. Determine the gross profit from sales for the period.

4. Determine the ending inventory cost on June 30, 2016.

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

Higher

Lower

Date

Transaction Number of Units Per Unit Total Apr. 3 Inventory 25 $1,200 $30,000 8 Purchase 75 1,240 93,000 11 Sale 40 2,000 80,000 30 Sale 30 2,000 60,000 May 8 Purchase 60 1,260 75,600 10 Sale 50 2,000 100,000 19 Sale 20 2,000 40,000 28 Purchase 80 1,260 100,800 June 5 Sale 40 2,250 90,000 16 Sale 25 2,250 56,250 21 Purchase 35 1,264 44,240 28 Sale 44 2,250 99,000

Explanation / Answer

Slolution:

1. Statement showing inventory, purchases, and cost of merchandise sold data in a perpetual inventory using First in First out (FIFO) Method
Exhibit 4, using the first-in, first-out method

A sales journal entry is a journal entry in the sales journal to record a credit sale of inventory. All of the cash sales of inventory are recorded in the cash receipts journal and all non-inventory sales are recorded in the general journal.

Since a sales journal entry consists of selling inventory on credit, four main accounts are affected by the business transaction: the accounts receivable and revenue accounts as well as the inventory and cost of goods sold accounts.

When a piece of merchandise or inventory is sold on credit, two business transactions need to be record. First, the accounts receivable account must increase by the amount of the sale and the revenue account must increase by the same amount. This entry records the amount of money the customer owes the company as well as the revenue from the sale.

Second, the inventory has to be removed from the inventory account and the cost of the inventory needs to be recorded. So a typical sales journal entry debits the accounts receivable account for the sale price and credits revenue account for the sales price. Cost of goods sold is debited for the price the company paid for the inventory and the inventory account is credited for the same price.

2. Journal Entries

3. From the above Stament it can be seen that the Gross Profit is $ 214,474 ($525,250 - $310,776).

4. From the above Statement of Sl. No. 1 the ending is 26 Units $ 1,264 = $32,864.

1. Statement showing inventory, purchases, and cost of merchandise sold data in a perpetual inventory using First in First out (FIFO) Method
Exhibit 4, using the first-in, first-out method

Date Purchases Cost of Merchandise sold Revenue from Sales Inventory 2016 Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost - - Sale Price Quantity Unit Cost Total Cost 3-Apr - - - - - - - - - 25 $1,200 $30,000 8 75 $1,240 $93,000 - - - - - - 25 $1,200 $30,000 - - - - - - - - - 75 $1,240 $93,000 11 - - - 25 $1,200 $30,000 25 $2,000 $50,000                -   $0 $0 - - - 15 $1,240 $18,600 15 $2,000 $30,000 60 $1,240 $74,400 30 - - - 30 $1,240 $37,200 30 $2,000 $60,000 30 $1,240 $37,200 8-May 60 $1,260 $75,600 - - - - - - 30 $1,240 $37,200 - - - - - - - - - 60 $1,260 $75,600 10 - - - 30 $1,240 $37,200 30 $2,000 $60,000 - - - - - - 20 $1,260 $25,200 20 $2,000 $40,000 40 $1,260 $50,400 19 - - - 20 $1,260 $25,200 20 $2,000 $40,000 20 $1,260 $25,200 28 80 $1,260 $100,800 - - - - - - 20 $1,260 $25,200 - - - - - - - - - 80 $1,260 $100,800 5-Jun - - - 20 $1,260 $25,200 20 $2,250 $45,000 - - - - - - 20 $1,260 $25,200 20 $2,250 $45,000 60 $1,260 $75,600 16 - - - 25 $1,260 $31,500 25 $2,250 $56,250 35 $1,260 $44,100 21 35 $1,264 $44,240 - - - - - - 35 $1,260 $44,100 - - - - - - - - - 35 $1,264 $44,240 28 - - - 35 $1,260 $44,100 35 $2,250 $78,750 - - - - - - 9 $1,264 $11,376 9 $2,250 $20,250 26 $1,264 $32,864 275 $343,640 249 $310,776 249 $525,250 26 $32,864

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