FIFO Perpetual Inventory The beginning inventory of merchandise at Dunne Co. and
ID: 2545504 • 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 42 $525 $22,050 8 Purchase 84 630 52,920 11 Sale 56 1,750 98,000 30 Sale 35 1,750 61,250 May 8 Purchase 70 700 49,000 10 Sale 42 1,750 73,500 19 Sale 21 1,750 36,750 28 Purchase 70 770 53,900 June 5 Sale 42 1,840 77,280 16 Sale 56 1,840 103,040 21 Purchase 126 840 105,840 28 Sale 63 1,840 115,920
Explanation / Answer
Dunne Co Schedule of Cost of Merchandise Sold FIFO Method For the three months ended May 31, 2016 Purchases Cost of Merchandise Sold Inventory UnitSales price Total Sales amount Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Apr. 3 42 $525 $22,050 Apr. 8 84 $630 $52,920 42 $525 $22,050 84 $ 630 $ 52,920 Apr. 11 42 $525 $22,050 70 $ 630 $ 44,100 $1,750 $73,500 14 $ 630 $8,820 $1,750 $24,500 Apr. 30 35 $ 630 $22,050 35 $ 630 $ 22,050 $1,750 $61,250 May 8 70 $700 $49,000 35 $ 630 $ 22,050 70 $ 700 $ 49,000 10-May 35 $ 630 $ 22,050 63 $ 700 $ 44,100 $1,750 $61,250 7 $ 700 $ 4,900 $1,750 $12,250 May 19 21 $ 700 $ 14,700 42 $ 700 $ 29,400 $1,750 $36,750 28-May 70 $770 $53,900 42 $ 700 $ 29,400 70 $770 $53,900 5-Jun 42 $ 700 $ 29,400 70 $ 770 $ 53,900 $1,840 $77,280 June 16 56 $ 770 $ 43,120 14 $ 770 $ 10,780 $1,840 $103,040 June 21 126 $840 $105,840 14 $ 770 $ 10,780 126 $ 840 $ 105,840 June 28 14 $ 770 $ 10,780 77 $ 840 $ 64,680 $1,840 $25,760 49 $ 840 $ 41,160 $1,840 $90,160 30-Jun Balances 77 $ 840 $ 64,680 TOTAL $565,740 Total $261,660 TOTAL $219,030 Total sales $565,740 Total cost of goods sold $219,030 JOURNAL ENTRY Account Title Debit Credit Accounts Receivable $565,740 Sales $565,740 Cost of goods sold $219,030 Inventory $219,030 CALCULATION OF GROSS PROFIT Sales $565,740 Cost of goods sold $ 219,030 GROSS PROFIT $346,710 ENDING INVENTORY COST Ending Inventory $ 64,680 5 Based on the data above, the unit purchase price has consistently increased over time Unit price of beginning inventory was $525 First purchase was at $630 The last pirchase at $840 In Last in First out method, the last purchased inventorty is sold out first Hence ending inventory will be initial purchases at lower price Hence ending inventory will be lowert Cost of goods sold will be higher Consequently, Gross profit will be lower
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