Perpetual Inventory Using FIFOBeginning inventory, purchases, and sales for Item B901 are as follows:May 1Inventory42 units @ $249Sale35 units13Purchase31 units @ $2828Sale15 unitsAssuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on May 28 and (b) the inventory on May 31.a. Cost of merchandise sold on May 28$b. Inventory on May 31$

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Asked Sep 26, 2019
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Perpetual Inventory Using FIFO
Beginning inventory, purchases, and sales for Item B901 are as follows:
May 1

Inventory
42 units @ $24
9

Sale
35 units
13

Purchase
31 units @ $28
28

Sale
15 units
Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on May 28 and (b) the inventory on May 31.
a. Cost of merchandise sold on May 28
$
b. Inventory on May 31
$

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Expert Answer

Step 1

First-in-First-Out:

 

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

 

Cost of goods sold:

 

Cost of goods sold refers to the total direct costs incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads.

 

Ending Inventory:

 

It represents the quantity and price of the goods unsold and laying at the store at the end of a particular period.

Step 2

a.

 

Determine the cost of merchandise sold on May 28.

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Number Rate per of units unit (S) cost (S) Total Particulars Beginning balance on May 1 |Less: Sale on May 9 Cost of merchandise available at the end of May 9 |Purchase on May 13 42 24 1,008 35 24 840 7 24 168 31 28 868 7 Cost of merchandise available at the end of May 13 24 168 28 31 868 Less: Sale on May 28 7 24 168 28 224 Cost of merchandise sold on May 28 392

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Step 3

b.

 

Determine the inventory on May 31.

...
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Number Rate per of units unit (S) cost (S) Total Particulars Beginning balance on May 1 Less: Sale on May 9 |Cost of merchandise available at the end of May 9 |Purchase on May 13 42 24 1,008 35 24 840 7 24 168 31 28 868 7 Cost of merchandise available at the end of May 13 24 168 28 31 868 Less: Sale on May 28 7 24 168 8 28 224 Ending inventory on May 31 23 28 644

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