Question

E6–2 Elmo’s Music carries a large inventory of guitars and other musical instruments. The store uses the FIFO method and a perpetual inventory system. Company records indicate the following for a particular line of guitars that sell for $1,600 each:

Date	Item	Quantity	Unit Cost
May 1	Balance	5	$900
6	Sale	3
8	Purchase	10	840
17	Sale	4
30	Purchase	5	840

Required

Prepare a perpetual inventory record for the guitars. Then determine the amounts Elmo’s Music should report for ending inventory and cost of goods sold under the FIFO method.

Answer 1

Answer 1. Perpatual Inventory Record for Guitars
FIFO PERPETUAL INVENTORY METHOD
	PURCHASE			COST OF GOODS SOLD			BALANCE
DATE	QUANTITY	UNIT COST	TOTAL COST	QUANTITY	UNIT COST	TOTAL COST	QUANTITY	UNIT COST	TOTAL COST
Beg inventory							5	$           900	$          4,500
6-May				3	$           900	$          2,700	2	$           900	$          1,800
8-May	10	$           840	$          8,400				2	$           900	$          1,800
							10	$           840	$          8,400
17-May				2	$           900	$          1,800			$                 -
				2	$           840	$          1,680	8	$           840	$          6,720
30-May	5	$           840	$          4,200				8	$           840	$          6,720
							5	$           840	$          4,200
Total	15	$        1,680	$        12,600	7	$       2,640	$          6,180
Answer 2 Value of Cost of Goods sold and ending inventory
Cost of Good sold	$      6,180
Value of Ending Units	$    10,920
Above answer detailed below
COST OF GOODS SOLD
QUANTITY	UNIT COST	TOTAL COST
3	$          900	$        2,700
2	$          900	$        1,800
2	$          840	$        1,680
7	$      2,640	$        6,180
Ending Units Value
QUANTITY	UNIT COST	TOTAL COST
8	$          840	$        6,720
5	$          840	$        4,200
Total for 13 units		$     10,920