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

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

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

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

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

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?

Higher

Lower

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

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 exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

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

	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