Question

Perpetual Inventory Using LIFO Beginning inventory, purchases, and sales data for prepaid cell phones for May are as follows: Inventory Purchases Sales May 1 2,800 units at $21 May 10 1,400 units at $23 May 12 1,960 units May 20 1 ,260 units at $25 May 14 1,680 units May 31 840 units 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. Unde units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column. Schedule of Cost of Merchandise Sold LIFO Method Prepaid Cell Phones cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Inventory Unit Cost Inventory Total Cost Date May 1 May 10 May 12 May 14 May 20 May 31 May 31 Balances b. Based upon the preceding data, would you expect the inventory to be higher or lower using the first-in, first-out method?

Answer 1

	Purchases			Cost of Merchandise sold			Inventory
	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost
May 1							2800	21	58800
May 10	1400	23	32200				2800	21	58800
							1400	23	32200
May 12				1400	23	32200	2240	21	47040
				560	21	11760
May 14				1680	21	35280	560	21	11760
May 20	1260	25	31500				560	21	11760
							1260	25	31500
May 31				840	25	21000	560	21	11760
							420	25	10500
May 31 Balances						100240			22260
b
Inventory would be higher under First-in, first-out method.