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 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?

CHART OF ACCOUNTS

Midnight Supplies

General 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

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.

Date	Purchases			Cost of goods Sold			Inventory
Date	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 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.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

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

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