Perpetual Inventory Using FIFO Beginning inventory purchases

Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data for portable DVD players are as follows: Apr. 1Inventory 10 15 20 24 30 Sale Purchase Sale Sale Purchase 59 units @ $69 42 units 27 units $72 23 units 8 units 36 units @ $75 The business maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column. Cost of the Merchandise Sold Schedule First-in, First-out Method Portable DVD Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity Inventory Unit Cost Inventory Total Cost Apr. 1 Apr. 10 Apr. 15 Apr. 20 Apr. 24 Apr. 30 Apr. 30 Balances b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Solution

Cost of Merchanised Sold Schedule

First in,First out method

Portable DVD Players

Date

Quantity
purchased

purchase
unit cost

purchase
total cost

quantity
sold

cost
of merchandise sold unit cost

cost
of merchandise sold total cost

inventory
quantity

Inventory unit cost

Inventory
total cost

1-Apr

59

69

4071

10-Apr

42

69

2898

17

69

1173

15-Apr

27

72

1944

17

69

1173

27

72

1944

20-Apr

17

69

1173

6

72

432

21

72

1512

24-Apr

8

72

576

13

72

936

30-Apr

36

75

2700

13

72

936

36

75

2700

30-Apr

balance

5079

3636

b)

Inventory cost to be lower using LIFO. Closing Inventory units is 49 units and cost per unit is 69.

Total inventory cost is 49*69 = 3381 which is lower than FIFO method.

		Cost of Merchanised Sold Schedule
		First in,First out method
		Portable DVD Players
Date	Quantity purchased		purchase unit cost		purchase total cost		quantity sold		cost of merchandise sold unit cost		cost of merchandise sold total cost		inventory quantity	Inventory unit cost	Inventory total cost
1-Apr													59	69	4071
10-Apr							42		69		2898		17	69	1173
15-Apr	27		72		1944								17	69	1173
													27	72	1944
20-Apr							17		69		1173
							6		72		432		21	72	1512
24-Apr							8		72		576		13	72	936
30-Apr	36		75		2700								13	72	936
													36	75	2700
30-Apr	balance										5079				3636
b)
Inventory cost to be lower using LIFO. Closing Inventory units is 49 units and cost per unit is 69.
Total inventory cost is 49*69 = 3381 which is lower than FIFO method.