Solve the follwing problem.

1. Record the inventory, purchases, and cost of goods 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 Goods Sold Unit Cost column and in the Inventory Unit Cost column.

2. Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.

3. Determine the gross profit from sales for the period.

4. Determine the ending inventory cost as of March 31.

5. Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?

Higher

Lower

FIFO perpetual inventory

CHART OF ACCOUNTSMidnight SuppliesGeneral Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Office Equipment
192	Accumulated Depreciation-Office Equipment
193	Store Equipment
194	Accumulated Depreciation-Store Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
222	Interest Payable
231	Salaries Payable
241	Sales Tax Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends
313	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
515	Credit Card Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Insurance Expense
534	Office Supplies Expense
535	Rent Expense
536	Repairs Expense
537	Selling Expenses
538	Store Supplies Expense
561	Depreciation Expense-Office Equipment
562	Depreciation Expense-Store Equipment
590	Miscellaneous Expense
710	Interest Expense

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

Date		Transaction	Number of Units	Per Unit	Total
Jan.	1	Inventory	2,500	$52.00	$130,000
	10	Purchase	7,800	60.00	468,000
	28	Sale	3,750	104.00	390,000
	30	Sale	1,200	104.00	124,800
Feb.	5	Sale	500	104.00	52,000
	10	Purchase	17,500	62.00	1,085,000
	16	Sale	8,600	109.00	937,400
	28	Sale	8,900	109.00	970,100
Mar.	5	Purchase	14,200	63.60	903,120
	14	Sale	10,200	109.00	1,111,800
	25	Purchase	3,400	64.00	217,600
	30	Sale	7,900	109.00	861,100

	Instructions
1.	Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3 , using the first-in, first-out method.
2.	Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.
3.	Determine the gross profit from sales for the period.
4.	Determine the ending inventory cost as of March 31.
5.	Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?