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The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30, 2016, are as follows:

The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30, 2016, are as follows:

Date

Transaction

Number of Units

Per Unit

Total

Apr. 3 Inventory 25 $1,200 $30,000
8 Purchase 75 1,240 93,000
11 Sale 40 2,000 80,000
30 Sale 30 2,000 60,000
May 8 Purchase 60 1,260 75,600
10 Sale 50 2,000 100,000
19 Sale 20 2,000 40,000
28 Purchase 80 1,260 100,800
June 5 Sale 40 2,250 90,000
16 Sale 25 2,250 56,250
21 Purchase 35 1,264 44,240
28 Sale 44 2,250 99,000
Instructions
1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in

Exhibit 4

, 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 June 30. 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 on June 30, 2016.
5. Based upon the preceding data, would you expect the inventory using the last-in, first-out method

The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases.

to be higher or lower?

none

X

FIFO

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

Exhibit 4

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

Date Purchases Cost of Merchandise Sold Inventory
2016 Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost
Apr. 3
8
8
11
11
30
May 8
8
10
10
19
28
28
Jun. 5
5
16
21
21
28
28
30 Balances

Points:

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none

X

Chart of Accounts

CHART OF ACCOUNTS
Dunne Co.
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

none

X

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 June 30. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

Solution

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

Points:

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none

X

Final Questions

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

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Explanation

4. Determine the ending inventory cost on June 30, 2016.

Points:

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Explanation

5. Based upon the preceding data, would you expect the inventory using the last-in, first-out method

The method of inventory costing based on the assumption that the cost of merchandise sold is the cost of the most recent purchases.

to be higher or lower?

Higher

Lower

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