FIFO Perpetual Inventory The beginning inventory of merchandise at Dunne Co. and
ID: 2542495 • Letter: F
Question
FIFO Perpetual Inventory
The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30 are as follows:
Required:
1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the first-in, first-out method. 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.
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.
3. Determine the gross profit from sales for the period.
$
4. Determine the ending inventory cost as of June 30.
$
5. Based upon the preceding data, would you expect the inventory using the last-in, first-out method to be higher or lower?
of Units Per Unit Total Apr. 3 Inventory 72 $600 $43,200 8 Purchase 144 720 103,680 11 Sale 96 2,000 192,000 30 Sale 60 2,000 120,000 May 8 Purchase 120 800 96,000 10 Sale 72 2,000 144,000 19 Sale 36 2,000 72,000 28 Purchase 120 880 105,600 June 5 Sale 72 2,100 151,200 16 Sale 96 2,100 201,600 21 Purchase 216 960 207,360 28 Sale 108 2,100 226,800
Explanation / Answer
Requirement 1 Dunne Co. Schedule of Cost of Merchandise Sold FIFO Method For the three months ended May 31, 2016 Purchases Cost of Merchandise Sold Inventory Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Apr. 3 72 600 43200 Apr. 8 144 720 103680 72 600 43200 144 720 103680 Apr. 11 72 600 43200 120 720 86400 24 720 17280 Apr. 30 60 720 43200 60 720 43200 May-08 120 800 96000 60 720 43200 120 800 96000 May-10 60 720 43200 108 800 86400 12 800 9600 May-19 36 800 28800 72 800 57600 May-28 120 880 105600 72 800 57600 120 880 105600 Jun-05 72 800 57600 120 880 105600 Jun-16 96 880 84480 24 880 21120 Jun-21 216 960 207360 24 880 21120 216 960 207360 Jun-28 24 880 21120 132 960 126720 84 960 80640 Jun-30 600 512640 540 429120 132 960 126720 Requirement 2 Determination of the total sales and the total cost of merchandise sold for the period. Record sale 540 1107600 =96*2000+60*2000+72*2000+36*2000+72*2100+96*2100+108*2100 Record cost 540 429120 Amount in $ Date General Journal Debit Credit Accounts Receivable 1107600 Revenue from sales 1107600 Cost of goods sold 429120 Inventory 429120 To record the sales on account and cost of goods sold Requirement 3 Determination of gross profit from sales for the period Gross profit =Sales-cost of goods sold Gross profit = 1107600-429120 Gross profit = 678480 Requirement 4 Determination of ending inventory cost as of June 30 Inventory Quantity Unit Cost Total Cost 132 960 126720 Requirement 5 Based on the preceding data, we expect the inventory using LIFO method to be lower, as in the beginning the unit cost of merchandise was lower than the current one. So if we value the inventory using LIFO, it will be lower.
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