v2.cengagenow.com Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales for Item HM46 are as follows: August 1 Inventory 9 Sale 48 units $25 30 units $27 32 units 13 Purchase 25 Sale 20 units Assuming a perpetual inventory system and using the first- in, first-out (FIFO) method, determine (a) the cost of merchandise sold on August 25 and (b) the inventory on August 31. a. Cost of merchandise sold on August 25 b. Inventory on August 31 Feedback Check My Work x a. When the FIFO method is used, costs are included in cost of merchandise sold in the order in which they were purchased. Think of your inventory in terms of "layers." Determine how much inventory remains from each layer after each sale. b. The ending inventory is made up of the most recent purchases.