Question

E6-1B. FIFO (Learning Objective 2) 10–15 min.Tee Time Inc. carries a line of monogrammed putters. Tee Time Inc. uses the FIFO method and a perpetual inventory system. The sale price of each putter is $170. Company records indicate the following activity for putters for the month of January: The inventory record is as follows. Date Item Quantity Unit Cost January 1 Balance 3 $92 7 Purchase 11 $96 11 Sale 12 Blank 19 Purchase 13 $98 28 Sale 5 Blank RequirementsPrepare a perpetual inventory record for the putters to determine the amount Tee Time Inc. should report for ending inventory and cost of goods sold using the FIFO method.Journalize Tee Time Inc.’s inventory transactions using the FIFO method. Assume all purchases and sales are on account.

Requirements

Prepare a perpetual inventory record for the putters to determine the amount Tee Time Inc. should report for ending inventory and cost of goods sold using the FIFO method.

Journalize Tee Time Inc.’s inventory transactions using the FIFO method. Assume all purchases and sales are on account.

Answer 1

To determine the amount Tee Time Inc. should report for ending inventory and cost of goods sold using the FIFO method, update the perpetual inventory record and calculate the cost of goods sold using the FIFO method.

Step-by-step explanation:

To determine the amount Tee Time Inc. should report for ending inventory and cost of goods sold using the FIFO method, we need to update the perpetual inventory record based on the given transactions. The FIFO method assumes that the first units purchased are the first ones sold. Therefore, we will be using the unit cost of the oldest inventory first when calculating the cost of goods sold.

1. Beginning Balance: 3 putters at $92/unit = $276.

2. Purchase on January 7: 11 putters at $96/unit = $1,056. Update the inventory record.

3. Sale on January 11: 12 putters sold. Determine the cost of goods sold using the FIFO method and update the inventory record accordingly.

4. Purchase on January 19: 13 putters at $98/unit = $1,274. Update the inventory record.

5. Sale on January 28: 5 putters sold. Determine the cost of goods sold using the FIFO method and update the inventory record accordingly.

Based on the updated perpetual inventory record, Tee Time Inc. should report an ending inventory of 11 putters at a cost of $98/unit. The cost of goods sold using the FIFO method is calculated as follows: (($92 × 3) + ($96 × 9)) - (($92 × 3) + ($96 × 9)) = $1,164.

Therefore, the ending inventory amount is $1,078, and the cost of goods sold is $1,164.