Q29PGA_1 - Horngren'S Financial And Managerial Accounting

Question

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

                                                  Units                Unit Cost               Unit Sales Price

Aug. 3            Sale                      45                                                            \) 85

8                     Purchase              90                      $ 54

21                   Sale                       85                                                               88

30                   Purchase              15                          58

 

Requirements

1. Prepare a perpetual inventory record for the merchandise inventory using the FIFO inventory costing method.

Step-by-Step Solution

Answer

The ending inventory under the FIFO method comes out to be $1,410.

Step-by-Step Solution Step 1: FIFO Method

FIFO method computes the cost of issued inventory based on the sequence of first in first out. Thus whenever any unit is sold, its cost is matched with the earliest purchased inventory assuming that the inventory would be issued in the first-in-first-out method.

Step 2: Perpetual inventory table under the FIFO method

	Purchases			Cost of goods sold			Inventory on hand
Date	Qty	Unit cost	Total Cost	Qty	Unit cost	Total Cost	Qty	Unit Cost	Total Cost
Aug 1							50	$35	$1,750
Aug 3				45	$35	$1,575	5	$35	$175
Aug 8	90	$54	$4,860				5 90	$35 $54	$5,035
Aug 21				5 80	$35 $54	$4,495	10	$54	$540
Jan 26	15	$58	$870				10 15	$54 $58	$1,410
Total	105		$5,730	130		$6,070	10 15	$54 $58	$1,410