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
Instructions
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.
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 on June 30, 2014.
5. Based upon the preceding data, would you expect the inventory using the last-in,
first-out method to be higher or lower?
Answer:
2
Accounts Receivable 525,250
Sales 525,250*
Cost of Merchandise Sold 310,776
Merchandise Inventory 310,776
*$525,250 = $80,000 + $60,000 + $100,000 + $40,000 + $90,000 + $56,250 + $99,000
3. $214,474 ($525,250 – $310,776)
4. $32,864 ($26 units × $1,264)
5. Since the prices rose from $1,200 for the April 3 inventory to $1,264 for the purchase on June 21, we would expect that under last-in, first-out the inventory would be lower.
1.
Date
Purchases Cost of Merchandise Sold Inventory
Quantity
Unit
Cost
Total
Cost Quantity
Unit
Cost
Total
Cost Quantity
Unit
Cost
Total
Cost
Apr. 3 25 1,200 30,000
8 75 1,240 93,000 25
75
1,200
1,240
30,000
93,000
11 25
15
1,200
1,240
30,000
18,600 60 1,240 74,400
30 30 1,240 37,200 30 1,240 37,200
May 8 60 1,260 75,600 30
60
1,240
1,260
37,200
75,600
10 30
20
1,240
1,260
37,200
25,200 40 1,260 50,400
19 20 1,260 25,200 20 1,260 25,200
28 80 1,260 100,800 20
80
1,260
1,260
25,200
100,800
June 5 20
20
1,260
1,260
25,200
25,200 60 1,260 75,600
16 25 1,260 31,500 35 1,260 44,100
21 35 1,264 44,240 35
35
1,260
1,264
44,100
44,240
28 35
9
1,260
1,264
44,100
11,376 26 1,264 32,864
30 Balances 310,776 32,864