LIFOPerpetual Inventory

The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31 are as follows:

Jan. 1		Inventory	7,500		$75.00		$562,500
10		Purchase	22,500		85.00		1,912,500
28		Sale	11,250		150.00		1,687,500
30		Sale	3,750		150.00		562,500
Feb. 5		Sale	1,500		150.00		225,000
10		Purchase	54,000		87.50		4,725,000
16		Sale	27,000		160.00		4,320,000
28		Sale	25,500		160.00		4,080,000
Mar. 5		Purchase	45,000		89.50		4,027,500
14		Sale	30,000		160.00		4,800,000
25		Purchase	7,500		90.00		675,000
30		Sale	26,250		160.00		4,200,000

Required:

1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated inExhibit 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. Round unit cost to two decimal places, if necessary.

Jan. 1							$	$
Jan. 10	$	$
Jan. 28				$	$
Jan. 30
Feb. 5
Feb. 10
Feb. 16
Feb. 28
Mar. 5
Mar. 14
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

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 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 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.

3/17/17, 9(31 PM 1. 2. LIFO Perpetual Inventory 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 7,500 $75.00 $562,500 10 Purchase 22,500 85.00 1,912,500 28 Sale 11,250 150.00 1,687,500 30 Sale 3,750 150.00 562,500 Feb. 5 Sale 1,500 150.00 225,000 10 Purchase 54,000 87.50 4,725,000 16 Sale 27,000 160.00 4,320,000 28 Sale 25,500 160.00 4,080,000 Purchase 45,000 89.50 4,027,500 14 Sale 30,000 160.00 4,800,000 25 Purchase 7,500 90.00 675,000 30 Sale 26,250 160.00 4,200,000 Mar. 5 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. Round unit cost to two decimal places, if necessary. Midnight Supplies Schedule of Cost of Goods Sold LIFO Method For the Three Months Ended March 31 Purchases Date Quantity Unit Cost Cost of Goods Sold Total Cost Quantity Unit Cost Total Cost Jan. 1 Jan. 10 Jan. 28 Jan. 30 22,500 $ 85 $ 1,912,500 7,500 3,750 $ 75 $ 562,500 85 15,000 Inventory Quantity 7,500 7,500 Unit Cost Total Cost 75 $ 562,500 75 562,500 22,500 85 1,912,500 18,750 85 1,593,750 $ http://cxp.cengage.com/activityservice/run/html5/handler.jsp?id=e10...engagenow.com&xdm_c=activityService_activity_1489804832241&xdm_p=1 Page 1 of 3 3/17/17, 9(31 PM 85 Feb. 1,500 5 Feb. 10 54,000 88 16 Feb. 28 5 45,000 90 14 25 7,500 90 127,500 13,500 85 13,500 85 1,147,500 13,500 85 1,247,500 25,500 88 2,244,000 15,000 88 1,320,000 4,027,500 Mar. Mar. 85 1,275,000 4,725,000 Feb. Mar. 675,000 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. http://cxp.cengage.com/activityservice/run/html5/handler.jsp?id=e10...engagenow.com&xdm_c=activityService_activity_1489804832241&xdm_p=1 Page 2 of 3 3/17/17, 9(31 PM 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 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 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. Learning Objective 2, Learning Objective 3. 3. 4. 5. 2 more Check My Work uses remaining. http://cxp.cengage.com/activityservice/run/html5/handler.jsp?id=e10...engagenow.com&xdm_c=activityService_activity_1489804832241&xdm_p=1 Page 3 of 3