The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows:
| Jan. |
1 |
Inventory |
2,500 |
$52.00 |
$130,000 |
| 10 |
Purchase |
7,800 |
60.00 |
468,000 |
| 28 |
Sale |
3,750 |
104.00 |
390,000 |
| 30 |
Sale |
1,200 |
104.00 |
124,800 |
| Feb. |
5 |
Sale |
500 |
104.00 |
52,000 |
| 10 |
Purchase |
17,500 |
62.00 |
1,085,000 |
| 16 |
Sale |
8,600 |
109.00 |
937,400 |
| 28 |
Sale |
8,900 |
109.00 |
970,100 |
| Mar. |
5 |
Purchase |
14,200 |
63.60 |
903,120 |
| 14 |
Sale |
10,200 |
109.00 |
1,111,800 |
| 25 |
Purchase |
3,400 |
64.00 |
217,600 |
| 30 |
Sale |
7,900 |
109.00 |
861,100 |
Instructions
1. Record the inventory, purchases, and cost of goods 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 goods sold for the period. Journalize the entries in the sales and cost of goods sold accounts. Assume that all sales were on account and date your journal entry March 31. Refer to the Chart of Accounts for exact wording of account titles.
3. Determine the gross profit from sales for the period.
4. Determine the ending inventory cost as of March 31.
5. Based upon the preceding data, would you expect the ending inventory using the last-in, first-out method to be higher or lower?
X Journal
CHART OF ACCOUNTSMidnight SuppliesGeneral Ledger
ASSETS
110 Cash
111 Petty Cash
120 Accounts Receivable
131 Notes Receivable
132 Interest Receivable
141 Inventory
145 Office Supplies
146 Store Supplies
151 Prepaid Insurance
181 Land
191 Office Equipment
192 Accumulated Depreciation-Office Equipment
193 Store Equipment
194 Accumulated Depreciation-Store Equipment
LIABILITIES
210 Accounts Payable
221 Notes Payable
222 Interest Payable
231 Salaries Payable
241 Sales Tax Payable
EQUITY
310 Common Stock
311 Retained Earnings
312 Dividends
313 Income Summary
REVENUE
410 Sales
610 Interest Revenue
EXPENSES
510 Cost of Goods Sold
515 Credit Card Expense
516 Cash Short and Over
520 Salaries Expense
531 Advertising Expense
532 Delivery Expense
533 Insurance Expense
534 Office Supplies Expense
535 Rent Expense
536 Repairs Expense
537 Selling Expenses
538 Store Supplies Expense
561 Depreciation Expense-Office Equipment
562 Depreciation Expense-Store Equipment
590 Miscellaneous Expense
710 Interest Expense