Assume that the business in Exercise 7-9 maintains a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, assuming the first-in, first-out method. Present the data in the form illustrated in Exhibit 3.

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Answer 1

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Financial Accounting

15th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337272124

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Answer 2

BuyFind

Financial Accounting

15th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337272124

Solutions

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Answer 3

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Answer 4

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Answer 5

To determine

Determine the cost of merchandise sold for each sale and inventory balance as on December 31.

Explanation of Solution

Perpetual Inventory System: Perpetual Inventory System refers to the inventory system that maintains the detailed records of every inventory transactions related to purchases, and sales on a continuous basis. It shows the exact on-hand-inventory at any point of time.

First-in-First-Out method: 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 cost of merchandise sold is calculated by adding all the total cost of merchandise sold during the month. The value of the ending inventory consists of the recent purchased items.

Calculate the cost of merchandise sold and ending inventory.

FIFO
	Purchases			Cost of merchandise sold			Inventory
Date	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost
1-Jan							4,000	$20	$80,000

Assume that the business in Exercise 7-9 maintains a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, assuming the first-in, first-out method. Present the data in the form illustrated in Exhibit 3.

Financial Accounting

Solutions

Financial Accounting