Chapter 7 HW: 1

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:

Date		Transaction	Number of Units		Per Unit		Total
Apr. 3		Inventory	54		$375		$20,250
8		Purchase	108		450		48,600
11		Sale	72		1,250		90,000
30		Sale	45		1,250		56,250
May 8		Purchase	90		500		45,000
10		Sale	54		1,250		67,500
19		Sale	27		1,250		33,750
28		Purchase	90		550		49,500
June 5		Sale	54		1,315		71,010
16		Sale	72		1,315		94,680
21		Purchase	162		600		97,200
28		Sale	81		1,315		106,515

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? (Higher or lower)

Dunne Co. Schedule of Cost of Merchandise Sold FIFO Method For the three-months ended June 30 Cost of Merchandise Sold Purchases Inventory Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Apr. 3 Apr. 8 Apr. 11 Apr. 30 May 8 IIIIII May 10 May 19 May 28 June 5 June 16 June 21 June 28 June 30 Balances Record sale Record cost