Beginning inventory, purchases, and sales data for portable game players are as follows:

Apr. 1		Inventory	120 units at $26
10		Sale	90 units
15		Purchase	140 units at $28
20		Sale	110 units
24		Sale	40 units
30		Purchase	160 units at $30

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. 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.

Cost of the Merchandise Sold Schedule
First-in, First-out Method
Portable Game Players
Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Merchandise Sold Unit Cost	Cost of Merchandise Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
Apr. 1								$	$
Apr. 10					$	$
Apr. 15		$	$
Apr. 20
Apr. 24
Apr. 30
Apr. 30	Balances					$			$

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Note that this exercise uses the perpetual inventory system. FIFO means that the first units purchased are assumed to be the first to be sold. Therefore, ending inventory is made up of the most recent purchases.

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

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Consider the cost of inventory when purchased and when sold. Remember FIFO reports higher gross profit, net income, and ending inventory than the LIFO method when costs (prices) are increasing.

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Partially correct