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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

FIFO perpetual inventory

The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31, are as follows:

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Instructions

  1. 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 3, using the first-in, first-out method.
  2. 2. Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and cost of merchandise sold accounts. Assume that all sales were on account.
  3. 3. Determine the gross profit from sales for the period.

(1)

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:

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.

To record: the inventory, purchases and cost of merchandise sold in perpetual inventory system.

Explanation

Calculate the cost of merchandise sold and ending inventory.

(2)

To determine

To record: the journal entries for sales and cost of merchandise sold accounts.

(3)

To determine
Gross profit from sales for the period.

(4)

To determine
ending inventory cost for the period.

(5)

To determine

To state: the inventory value to be higher or lower using LIFO method for the given above data.

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