The beginning inventory at RTE Office Supplies and data on purchases and sales for a three-month period

The beginning inventory at RTE Office Supplies and data on purchases and sales for a three-month period ending August 31, 2014, are as follows:


Date Transaction
Number
of Units
Per
Unit Total
June 1 Inventory 500 $30.00 $15,000
10 Purchase 1,500 34.00 51,000
28 Sale 750 50.00 37,500
30 Sale 250 52.00 13,000



Date Transaction
Number
of Units
Per
Unit Total
July 5 Sale 100 $55.00 $ 5,500
10 Purchase 3,600 35.00 126,000
16 Sale 1,800 56.00 100,800
28 Sale 1,700 60.00 102,000
Aug. 5 Purchase 3,000 35.80 107,400
14 Sale 2,000 60.00 120,000
25 Purchase 500 36.00 18,000
30 Sale 1,750 60.00 105,000


Instructions
1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory
record similar to the one illustrated in Exhibit 3, using the first-in, first-out method.

2. Determine the total sales and the total cost of merchandise sold for the period. Journalize
the entries in the sales and cost of merchandise sold accounts. Assume that all
sales were on account.

3. Determine the gross profit from sales for the period.

4. Determine the ending inventory cost as of August 31, 2014.

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


Answer:



Accounts Receivable 483,800
Sales 483,800*
Cost of Merchandise Sold 290,450
Merchandise Inventory 290,450
2.

*$483,800 = $37,500 + $13,000 + $5,500 + $100,800 + $102,000 + $120,000 + $105,000


3. $193,350 ($483,800 – $290,450)
4. $26,950 ($8,950 + $18,000)
5. Since the prices rose from $30 for the June 1 inventory to $36 for the purchase on August 25, we would expect that under the last-in, first-out method the inventory
would be lower.

1.
PROBLEMS
Date
2014
Purchases Cost of Merchandise Sold Inventory
Quantity
Unit
Cost
Total
Cost Quantity
Unit
Cost
Total
Cost Quantity
Unit
Cost
Total
Cost
June 1 500 30.00 15,000
10 1,500 34.00 51,000 500
1,500
30.00
34.00
15,000
51,000
28 500
250
30.00
34.00
15,000
8,500 1,250 34.00 42,500
30 250 34.00 8,500 1,000 34.00 34,000
July 5 100 34.00 3,400 900 34.00 30,600
10 3,600 35.00 126,000 900
3,600
34.00
35.00
30,600
126,000
16 900
900
34.00
35.00
30,600
31,500 2,700 35.00 94,500
28 1,700 35.00 59,500 1,000 35.00 35,000
Aug. 5 3,000 35.80 107,400 1,000
3,000
35.00
35.80
35,000
107,400
14 1,000
1,000
35.00
35.80
35,000
35,800 2,000 35.80 71,600
25 500 36.00 18,000 2,000
500
35.80
36.00
71,600
18,000
30 1,750 35.80 62,650 250
500
35.80
36.00
8,950
18,000
31 Balances 290,450 26,950