Question

Perpetual Inventory Using FIFO The following units of a particular item were available for sale during the calendar year: Jan. 1 Inventory 4,000 units at $39 Apr. 19 Sale 2,400 units June 30 Purchase 4,700 units at $43 Sept. 2 Sale 4,900 units Nov. 15 Purchase 1,900 units at $46 The firm maintains a perpetual inventory system. Determine the cost of goods 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. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

Answer 1

The breakdown of units sold, unit cost, total cost, cumulative COGS, remaining inventory, and the corresponding inventory cost after each sale using the FIFO method is given below.

To calculate the cost of goods sold (COGS) for each sale and the inventory balance after each sale using the FIFO (first-in, first-out) method, solve as thus:

1. Calculate Cost of Goods Sold (COGS):

- For the January 1 inventory, the cost per unit is $39.

- For the June 30 purchase, the cost per unit is $43.

- For the November 15 purchase, the cost per unit is $46.

2. Calculate COGS and Update Inventory After Each Sale:

a. Sale on April 19:

Date| Units Sold| Unit Cost| Total Cost| COGS| Inventory| Inventory Cost

Jan. 1| | $39| | | 4,000| $39|

Apr. 19| 2,400 | $39 | $93,600 | $93,600| 1,600 | $39|

b. Sale on Sept. 2:

Date| Units Sold| Unit Cost| Total Cost| COGS| Inventory| Inventory Cost

Jan. 1| | $39 | | | 4,000 | $39|

Apr. 19| 2,400 | $39 | $93,600 | $93,600| 1,600 | $39|

June 30| | $43| | | 4,700| $43|

Sept. 2| 4,900 | $43 | $211,700 | $305,300| 800 | $43|

c. No additional sale is made after this point.

3. Final Inventory Calculation:

Date| Units Sold| Unit Cost| Total Cost| COGS| Inventory| Inventory Cost

Jan. 1| | $39 | | | 4,000 | $39|

Apr. 19| 2,400 | $39 | $93,600 | $93,600| 1,600 | $39|

June 30| | $43| | | 4,700| $43|

Sept. 2| 4,900 | $43 | $211,700 | $305,300| 800 | $43|

Nov. 15| | $46 | | | 1,900 | $43|

The table provides a breakdown of units sold, unit cost, total cost, cumulative COGS, remaining inventory, and the corresponding inventory cost after each sale using the FIFO method.