Chapter 6: Q29PGA_1 (page 367)

Steel Mill began August with 50 units of iron inventory that cost $35 each. During August, the company completed the following inventory transactions:
Units Unit Cost Unit Sales Price
Aug. 3 Sale 45 $ 85
8 Purchase 90 $ 54
21 Sale 85 88
30 Purchase 15 58
Requirements
1. Prepare a perpetual inventory record for the merchandise inventory using the FIFO inventory costing method.

Short Answer

Expert verified

The ending inventory under the FIFO method comes out to be $1,410.

Step by step solution

Step-by-Step SolutionStep 1: FIFO Method

FIFO method computes the cost of issued inventory based on the sequence of first in first out. Thus whenever any unit is sold, its cost is matched with the earliest purchased inventory assuming that the inventory would be issued in the first-in-first-out method.

Perpetual inventory table under the FIFO method

	Purchases			Cost of goods sold			Inventory on hand
Date	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit Cost	Total Cost
Aug 1							50	$35	$1,750
Aug 3				45	$35	$1,575	5	$35	$175
Aug 8	90	$54	$4,860				5 90	$35 $54	$5,035
Aug 21				5 80	$35 $54	$4,495	10	$54	$540
Jan 26	15	$58	$870				10 15	$54 $58	$1,410
Total	105		$5,730	130		$6,070	10 15	$54 $58	$1,410

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

NATURE FOODS GROCERY
Income Statements
Years Ended June 30, 2019 and 2018
	2019	2018
Net Sales Revenue	\( 134,000	\) 119,000
Cost of Goods Sold:
Beginning Merchandise Inventory	\(17,000	\)14,000
Net Cost of Purchases	78,000	67,000
Cost of Goods Available for Sale	95,000	81,000
Less: Ending Merchandise Inventory	18,000	17,000
Cost of Goods Sold	77,000	64,000
Gross Profit	57,000	55,000
Operating Expenses	26,000	21,000
Net Income	\( 31,000	\) 34,000

Short Answer

Step by step solution

Step-by-Step SolutionStep 1: FIFO Method

Perpetual inventory table under the FIFO method

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Operational Management

Financial Performance

Nature of Business

Business Case Studies

Strategic Analysis

Human Resources

Study anywhere. Anytime. Across all devices.