April 1 Inventory 120 units at $39
6 Sale 90 units
14 Purchase 140 units at $40
19 Sale 110 units
25 Sale 45 units
30 Purchase 160 units at $43
The business maintains a perpetual inventory system, costing by the first-in, first-out method.
a. 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 3.
b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
Answer:
a.
Portable DVD Players
Date
Purchases Cost of Merchandise Sold Inventory
Quantity
Unit
Cost
Total
Cost Quantity
Unit
Cost
Total
Cost Quantity
Unit
Cost
Total
Cost
Apr. 1 120 39 4,680
6 90 39 3,510 30 39 1,170
14 140 40 5,600 30
140
39
40
1,170
5,600
19 30
80
39
40
1,170
3,200
60 40 2,400
25 45 40 1,800 15 40 600
30 160 43 6,880 15
160
40
43
600
6,880
30 Balances 9,680 7,480
b. Since the prices rose from $39 for the April 1 inventory to $43 for the purchase on April 30, we would expect that under last-in, first-out the inventory would be lower.