Beginning inventory, purchases, and sales data for portable game players are as follows:
Apr.
1 Inventory 120 units at $26
10 Sale 90 units
15 Purchase 140 units at $28
20 Sale 110 units
24 Sale 40 units
30 Purchase 160 units at $30
The business maintains a perpetual inventory system, costing by the first-in, first-out method.
a. 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.
b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
Answer:
a. Unit Total Unit Total Unit Total Quantity Cost Cost Quantity Cost Cost Quantity Cost Cost Apr. 1120 26 3,120 1090 26 2,340 30 26 780
15 140 28 3,92030 26 780 2030 26 780 60 28 1,680
80 28 2,240 2440 28 1,120 20 28 560 30 160 30 4,80020 28 560 30 Balances6,4805,360 b. Because the prices rose from $26 for the April 1 inventory to $30 for the purchase on April 30, we would expect that under last-in, first-out, the inventory would be lower.