Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows: Inventory May 1 2,100 units at $29 Purchases May 10 May 20 1,050 units at $31 945 units at $33 Sales May 12 May 14 May 31 1,470 units 1,260 units 630 units Assume that the business maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of 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. Schedule of Cost of Merchandise Sold FIFO Method Prepaid Cell Phones Date May 1 May 10 1,050 Purchases Quantity Purchases Unit Cost Purchases Total Cost Cost of Merchandise Sold Quantity Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity Inventory Unit Cost 2,100 Inventory Total Cost $ 29 31 32,550 2,100 29 2,977,700 X 77,700 X 1,050 31 40,950 X May 12 1,470 29 42,630 1,050 X 29 62,160 X May 14 May 20 May 31 May 31 Balances Feedback Check My Work 630 29 18,270 630 31 19,530 | || || 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. Think of your inventory in terms of "layers." In other words, your May 1 inventory plus your May 10 purchase make up your goods available for the May 12 sale. Under perpetual FIFO, you sell the May 1 goods first. Determine how much inventory remains from May 1 after the May 12 sale. Is this enough to satisfy the May 14 sale? If not take the remaining amount from the May 10 purchase. Next determine how much inventory is left from the May 10 purchase. This remaining amount will be one layer of your goods available for sale added to the May 20 purchase layer. Is there enough of the oldest May 10 layer to satisfy the May 31 sale? If so, any remainder of the May 10 layer plus the last May 20 purchase make up the ending inventory. By multiplying the units sold from each "layer" by their corresponding unit cost and adding the amounts together, you can determine the total cost of the units sold. Double-check your figure by taking the ending inventory amount away from the total inventory available for sale.