CHAPTER 15-15-5B

Objective: To record transactions in a perpetual inventory system and keep a perpetual inventory record.

Redwing Company sells Product B and keeps track of it using a perpetual inventory system. Redwing begins the year with 40 units of Product B, costing $40 each. All sales are recorded using the FIFO method. Transactions for January relating to Product B are as follows:

2011

Jan.

3 Purchased 60 units @ $42 each on account

10 Sold 25 units @ $65 each for cash

19 Sold 30 units @ $66 each on account

24 Purchased 25 units @ $43 each for cash

30 Sold 30 units @ $67 each on account

Directions:

1) Set up a perpetual inventory record. Enter the opening balance, a stock number of B2, Supplies as the department, and a reorder point of 40 units.

2) Record each of the transactions first on the perpetual inventory record and then in general journal form. Use FIFO to determine the cost of the units sold.

Check Figure: January 10, cost of units sold = $1,000