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 merchandise 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 merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
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 inventory using the last-in, first-out method to be higher or lower?

FIFO

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in

Exhibit 3

, using the first-in, first-out method.

Date	Purchases			Cost of Merchandise Sold			Inventory
	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jan. 1
10
10
28
28
30
Feb. 5
10
10
16
16
28
Mar. 5
5
14
14
25
25
30
30
31	Balances

Chart of Accounts

CHART OF ACCOUNTS

Midnight Supplies

General Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise 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	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise 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

Journal

2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

Final Questions

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 inventory using the last-in, first-out method to be higher or lower?

Lower

Higher