Question

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

Answer 1

Answer:

Ending Inventory FIFO = 1010,625

Total Sales =$ 19,650,000

Cost Of Goods Sold 18639,375

Explanation:

Date     Transaction     Number of Units    Per Unit      Total

Jan. 1 Inventory               7,500                $75.00          $562,500

10 Jan Purchase            22,500                85.00          1,912,500

Total                            30,000

28 Jan Sale                   11,250              150.00              1,687,500

30 Jan Sale                  3,750                 150.00              562,500

Inventory Ending                15,000                                                

Feb. 5 Sale                    1,500                150.00               225,000

                                  13,500                                                              

10 Feb Purchase           54,000             87.50                4,725,000

                                      67,500                                                          

16 Feb Sale                27,000              160.00               4,320,000

28 Feb Sale               25,500             160.00                4,080,000

Inventory Ending        15,000                                                        

Mar. 5 Purchase          45,000           89.50               4,027,500

14 Mar Sale                30,000           160.00                 4,800,000

25 Mar Purchase           7,500            90.00               675,000

30 Mar Sale                26,250             160.00              4,200,000

Ending Units              11250                                                            

Ending Inventory FIFO = 1010,625

7,500  units at  $ 90.00 = $  675,000

3750 units at  $ 89.50   = $ 335,625

Total Sales = Sales In Jan + Sales in Feb + Sales In Mar

                      = 1,687,500 +562,500 +4,320,000 + 4,080,000 +4,800,000+4,200,000 = $ 19,650,000

Cost Of Goods Sold= Sales Less Ending Inventory

Cost Of Goods Sold= $ 19,650,000- 1010,625= 18639,375

3. Journal Entries

Account Receivable $ 19,650,000 Dr.

Sales $ 19,650,000 Cr.

Cost Of Goods Sold 18639,375 Dr.

Merchandise Inventory 18639,375 Cr.

4. Ending Inventory FIFO = 1010,625

5. LIFO Ending inventory would be lower as price is increasing.