LIFO perpetual inventory Learning Objective 2 Learning Objective 3 The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31 are as follows: Number Date Transaction of Units Per Unit Total Jan. 1 Inventory 9,000 $60.00 $540,000 Jan. 10 Purchase 21,000 70.00 1,470,000 Jan. 28 Sale 10,250 140.00 1,435,000 Jan. 30 Sale 5,750 140.00 Feb. 5 Sale 3,500 140.00 805,000 490,000 Feb. 10 Purchase 39,500 75.00 2,962,500 Feb. 16 Sale 15,000 150.00 2,250,000 Feb. 28 Sale 10,000 150.00 1,500,000 Mar. 5 Purchase 25,000 Mar. 14 Sale 30,000 Mar. 25 Purchase Mar. 30 Sale 10,000 19,000 88.40 150.00 2,850,000 82.00 2,050,000 150.00 4,500,000 884,000 Required: 1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the last-in, first-out method. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cos first in the Cost of Goods Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column. Round unit cost to two decimal places, if necessary. Date Purchases Quantity Purchases Purchases Cost of Goods Sold Unit Cost Total Cost Quantity Cost of Goods Sold Unit Cost Cost of Goods Sold Total Cost Inventory Inventory Inventory Quantity Unit Cost Total Cost $ $ Jan. 1 Jan. 10 21,000 70 1,470,000 Jan. 28 Jan. 30 Feb. 5 9,000 X 60 X 540,000 X 70 540,000 X 1,470,000 IR Jan. 30 Feb. 5 Feb. 10 Feb. 16 Feb. 28 Mar. 5 Mar. 14 Mar. 25 Mar. 30 Learning Ob Learning Objective 3 39,500 75 2,962,500 70 540,000 X 1,470,000 Mar. 25 Mar. 30 Mar. 31 Balances 2. Determine the total sales, the total cost of goods sold, and the gross profit from sales for the period. Total sales Total cost of goods sold Gross profit 3. Determine the ending inventory cost as of March 31. Feedback Check My Work 1. When the perpetual inventory system is used, revenue is recorded each time a sale is made along with an entry to record the cost of the merchandise sold. LIFO means the last units purchased are assumed to be the first to be sold. Therefore after each sale, the remaining or ending inventory is made up of the first or earliest purchases. Think of your inventory in terms of "layers." The first sale comes from the most recent purchase layer. When deciding which layer to use for costing of each sale ask yourself: "Is there enoug inventory left in the most recent purchase to cover the sale?" If not, the other units sold should be taken from the second most recent purchase layer, which then contains the most recent costs. Continue this process for each transaction. If you have done this proble correctly, the remaining units making up ending inventory will be costed at the January 1 beginning inventory and January 10 unit purchase price. 2. Total sales are obtained by taking the number of units sold times their sale prices for all sales and adding these amounts together. The total cost of goods sold can be obtained by adding the LIFO costs in the perpetual inventory record. Sales minus cost of goods sold equals gross profit. 3. The ending inventory is what is left after subtracting the cost of goods sold from the goods available for sale. Multiply the units remaining after the last sale by their corresponding earliest layer cost to determine the LIFO cost of the ending inventory.