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Chapter 6: Q2TI-b (page 338)

Serenity Books has the following transactions in August related to merchandise inventory.

Aug. 1 Beginning merchandise inventory, 10 books @ \(15 each

3 Sold 3 books @ \)20 each

12 Purchased 8 books @ \(18 each

15 Sold 9 books @ \)20 each

20 Purchased 4 books @ \(20 each

28 Sold 5 books @ \)25 each

b. Determine the cost of goods sold and ending merchandise inventory by preparing a perpetual inventory record using the FIFO inventory costing method.

Short Answer

Expert verified

Cost of goods sold: $306

Ending Inventory: $98

Step by step solution

01

FIFO inventory costing under perpetual record

FIFO costing is a cost flow assumption of the first-in-first-out order for the issued inventory. Perpetual record is the method of updating inventory accounts continuously for each event. So FIFO inventory under perpetual record is the method of applying FIFO assumption for continuous updating of inventory records.

02

Computation of COGS and Ending Inventory under FIFO

Date

Purchase/opening

Sales

Balance

Units

Cost per unit

Amount

Units

Cost per unit

Amount

Units

Cost per unit

Amount











Aug1

10

$15

$150

10

$15

$150

3

3

$15

$75

7

$15

$105

12

8

$18

$144

7

8

$15

$18

$249

15

7

2

$15

$18

$141

6

$18

$108

20

4

$20

$80

6

4

$18

$20

$188

28

5

$18

$90

1

4

$18

$20

$98

Total

22

$374

17

$306

5

$98

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Most popular questions from this chapter

Discuss some measures that should be taken to maintain control over merchandise inventory.

Question:Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the following questions:

Requirements

1. Which inventory costing method produced the lowest cost of goods sold?

Question:Super Mart, a regional convenience store chain, maintains milk inventory by the gallon.

The first month’s milk purchases and sales at its Freeport, Florida, location follow:

Nov. 2 Purchased 11 gallons @ \(2.15 each

6 Purchased 2 gallons @ \)2.80 each

8 Sold 6 gallons of milk to a customer

13 Purchased 3 gallons @ $2.85 each

14 Sold 4 gallons of milk to a customer

Requirements

2. Determine the amount that would be reported in ending merchandise inventoryon November 15 using the LIFO inventory costing method

Determining inventory accounting principles

Ward Hardware used the FIFO inventory costing method in 2018. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward’s decision?

Question:New York Pool Supplies’s merchandise inventory data for the year ended December 31, 2019, follow:

Net Sales Revenue\( 58,000

Cost of Goods Sold:

Beginning Merchandise Inventory\) 4,900

Net Cost of Purchases 32,500

Cost of Goods Available for Sale37,400

Less: Ending Merchandise Inventory 4,700

Cost of Goods Sold32,700

Gross Profit \( 25,300

Requirements

1. Assume that the ending merchandise inventory was accidentally overstated by\)1,800. What are the correct amounts for cost of goods sold and gross profit?
See all solutions

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