Assume that the business in Exercise 7-3 maintains a perpetual inventory system, costing by the last-in, first-out 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.

Exercise 7-3,

Beginning inventory, purchases, and sales data for portable game players are as follows:

Apr. 1 ............. Inventory ............. 120 units at $26

..... 10 ............. Sale ............................. 90 units

..... 15 ............. Purchase .............. 140 units at $28

..... 20 ............. Sale ............................ 110 units

..... 24 ............. Sale .............................. 40 units

..... 30 ......... Purchase ................... 160 units at $30

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3.

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Exhibit: 4 Entries and Perpetual Inventory Account (LIFO)

Transcribed Image Text:

Jan, 4 Accounts Receivable21000 Item 127B Cost of Merchandise Sold Merchandioe Inventory Cost of Merchandise Sold 4 14,000 Unit Total 10 Merchandise Inventory 11,200 Quantity Cost Cost Quantity Cost CostQuantity Cost Cost 700 20.00 14,000 00 20.00 6,000 22 Accounts Recelvable 10800 10 500 2240 11,200 22 Cost of Merchandise Sold 8,064 Merchandise Invantory 360 2240 8,064 300 2000 6,000 140 2240 3,136 200 20.00 4000 100 20.00 28 Accounts Receivable 30 600 23.30 13,980 28 Cost of Merchandise Sold 5,136 Merchandise Inventory 30 Merchandise Irventory 13,980 Accounts Payable merchandise inventory