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LIFO Perpetual Inventory The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are as follows: Date Transaction Number

  1. LIFO Perpetual Inventory

    The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are as follows:

    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

    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 cost first in the Cost of Goods Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

    Dunne Co. Schedule of Cost of Goods Sold LIFO Method For the Three Months Ended June 30
    Purchases Cost of Goods Sold 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
    May 10
    May 19
    May 28
    June 5
    June 16
    June 21
    June 28
    June 30 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 on June 30. $

    Feedback

    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 goods 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 enough 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 problem correctly, the remaining units making up ending inventory will be costed at the April 3 beginning inventory and the May 28 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.

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