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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Perpetual inventory using LIFO

Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows:

Inventory   Purchases Sales
May 1 1,550 units at $44

May 10

20

720 units at $45

1,200 units at $48

May 12

14

31

1,200 units

830 units

1,000 units

  1. a. Assuming that the perpetual inventory system is used, costing by the LIFO method, determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.
  2. b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method?

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.

To determine: cost of merchandise sold for each sale and inventory balance after each sale by PC Phones as on May 31.

Explanation

In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first...

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