The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows:DateTransactionNumber of UnitsPer UnitTotalJan.1Inventory2,500$70.00$175,000 10Purchase8,00078.00624,000 28Sale3,800140.00532,000 30Sale1,250140.00175,000Feb.5Sale500140.0070,000 10Purchase17,00080.001,360,000 16Sale9,100145.001,319,500 28Sale8,700145.001,261,500Mar.5Purchase14,30081.601,166,880 14Sale9,800145.001,421,000 25Purchase3,00082.00246,000 30Sale7,900145.001,145,500  Instructions1.Record the inventory, purchases, and cost of goods 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 goods sold for the period. Journalize the entries in the sales and cost of goods 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 ending inventory using the last-in, first-out method to be higher or lower?

Question
Asked Nov 30, 2019
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 2,500 $70.00 $175,000
  10 Purchase 8,000 78.00 624,000
  28 Sale 3,800 140.00 532,000
  30 Sale 1,250 140.00 175,000
Feb. 5 Sale 500 140.00 70,000
  10 Purchase 17,000 80.00 1,360,000
  16 Sale 9,100 145.00 1,319,500
  28 Sale 8,700 145.00 1,261,500
Mar. 5 Purchase 14,300 81.60 1,166,880
  14 Sale 9,800 145.00 1,421,000
  25 Purchase 3,000 82.00 246,000
  30 Sale 7,900 145.00 1,145,500
 
  Instructions
1. Record the inventory, purchases, and cost of goods 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 goods sold for the period. Journalize the entries in the sales and cost of goods 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 ending inventory using the last-in, first-out method to be higher or lower?
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Expert Answer

Step 1

1.

Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record, using the first-in, first-out method.

Purchases
Cost of Goods Sold
Inventory
Total
Unit
Total
Unit
Total
Unit
Date
Quantity Cost
Quantity Cost
(S)
Quantity Cost
Cost (S)
Cost (S)
Cost
(S)
(S)
70
Jan.
2,500
175,000
70
175,000
2,500
10
8,000
78
624,000
8,000
624,000
78
2,500
70
175,000
28
6,700
78
522,600
1,300
78
101.400
30
1,250
78
97,500
5,450
78
425,100
Feb. 5
78
386,100
500
78
39,000
4,950
4,950
78
386,100
80 1,360,000
10
17,000
80 1,360,000
17,000
4,950
78
386,100
80 1,028,000
16
12,850
332,000
4,150
80
28
696,000
80
332,000
8,700
80
4,150
4,150
80
332,000
14,300 81.6 1,166,880
Mar. 5
14,300 81.6 1,166,880
4,150
80
332,000
8,650 81.6
14
705,840
5,650 81.6
461,040
8,650 81.6
705,840
25
3,000
82
246,000
246,000
3,000
82
750 81.6
61,200
7,900 81.6
30
705.840
3,000
82
246.000
Total
3,325,880
307,200
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Purchases Cost of Goods Sold Inventory Total Unit Total Unit Total Unit Date Quantity Cost Quantity Cost (S) Quantity Cost Cost (S) Cost (S) Cost (S) (S) 70 Jan. 2,500 175,000 70 175,000 2,500 10 8,000 78 624,000 8,000 624,000 78 2,500 70 175,000 28 6,700 78 522,600 1,300 78 101.400 30 1,250 78 97,500 5,450 78 425,100 Feb. 5 78 386,100 500 78 39,000 4,950 4,950 78 386,100 80 1,360,000 10 17,000 80 1,360,000 17,000 4,950 78 386,100 80 1,028,000 16 12,850 332,000 4,150 80 28 696,000 80 332,000 8,700 80 4,150 4,150 80 332,000 14,300 81.6 1,166,880 Mar. 5 14,300 81.6 1,166,880 4,150 80 332,000 8,650 81.6 14 705,840 5,650 81.6 461,040 8,650 81.6 705,840 25 3,000 82 246,000 246,000 3,000 82 750 81.6 61,200 7,900 81.6 30 705.840 3,000 82 246.000 Total 3,325,880 307,200

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Step 2

2.

Determine the total sales and the total cost of goods sold for the period and record the journal entries for sales and cost of merchandise sold accounts.

Sales
Unit
Date
Quantity
Total
cost
28-Jan
$532,000
$175,000
$70,000
$145 $1,319,500
$145 $1,261,500
$145 $1,421,000
$145 $1,145,500
$140
3,800
1,250
$140
30-Jan
5-Feb
$140
500
16-Feb
9,100
28-Feb
8,700
14-Mar
9,800
30-Mar
7,900
Total
$5,924,500
Hence, the total sales are $5,924,500 and cost of goods sold is $3,325,880 (from part 1)
Credit (S)
Debit (S)
Date
Account titles and Explanation
March
Accounts Receivable
31
5,924,500
Sales
5,924,500
(To record the sales of inventory)
Cost of merchandise sold
3,325,880
Merchandise Inventory
(To record the cost of goods sold)
3,325,880
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Sales Unit Date Quantity Total cost 28-Jan $532,000 $175,000 $70,000 $145 $1,319,500 $145 $1,261,500 $145 $1,421,000 $145 $1,145,500 $140 3,800 1,250 $140 30-Jan 5-Feb $140 500 16-Feb 9,100 28-Feb 8,700 14-Mar 9,800 30-Mar 7,900 Total $5,924,500 Hence, the total sales are $5,924,500 and cost of goods sold is $3,325,880 (from part 1) Credit (S) Debit (S) Date Account titles and Explanation March Accounts Receivable 31 5,924,500 Sales 5,924,500 (To record the sales of inventory) Cost of merchandise sold 3,325,880 Merchandise Inventory (To record the cost of goods sold) 3,325,880

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Step 3

Calculate the gross profit for t...

Gross Profit Total Sales - Cost of goods sold
- $5,924,500- $3,325,880
- $2,598,620
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Gross Profit Total Sales - Cost of goods sold - $5,924,500- $3,325,880 - $2,598,620

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