# Perpetual inventory using FIFO 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.

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

#### Solutions

Chapter
Section
Chapter 7, Problem 7.10EX
Textbook Problem

## Perpetual inventory using FIFOAssume 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.

Expert Solution
To determine

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.

To determine: cost of merchandise sold for each sale and inventory balance as on December 31.

### Explanation of Solution

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 Â Â Â Â Â Â 4,000 \$20 \$80,000 19-Apr Â Â Â 2,500 \$20 \$50,000 1,500 \$20 \$30,000 30-Jun 6,000 \$24 \$144,000 Â Â Â 1,500 \$20

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