Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data for DVD players are as follows: November 1 Inventory 120 units at $39 10 Sale 90 units 15 Purchase 140 units at $40 20 Sale 110 units 24 Sale 45 units 30 Purchase 160 units at $43 The business maintains a perpetual inventory system, costing by the first-in, first-out method. a. Determine the cost of goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column. Cost of Goods Sold Schedule First-in, First-out Method DVD Players Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Cost of Goods Sold Unit Cost Cost of Goods Sold Total Cost Inventory Quantity Inventory Unit Cost Inventory Total Cost Nov. 1 Nov. 10 Nov. 15 Nov. 20 Nov. 24 Nov. 30 Nov. 30 Balances b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

"First in first out" or FIFO is a method of inventory evaluation by which the process of goods buying and selling are assumed as having same chronological order.

FIFO

As per the question, if units are in inventory at two different costs, than the Cost of Goods Sold (COGS), and Inventory will be different, as per the given information:

⇒November 1, Inventory 120 units at $39

November 10, Sale 90 units

Cost of Goods Sold = 90 X $39 = $3,510

Remaining inventory = (120-90) x $39 = $1,170

⇒ November 15, Purchase 140 units at $40

November 20, Sale 110 units

Cost of Goods Sold = (30 x $39) + (80 x $40) = $1,170 + $3,200 = $4,370

Remaining inventory = 60 x $40 = $2,400

⇒ November 24, Sale 45 units

COGS = 45 x $40 = $1,800

Remaining inventory = 15 x $40 = $600

⇒November 30, Purchase 160 units at $43

Remaining inventory = $600 + (160 x $43) = $7,480

B. Under Last in, First Out (LIFO)

⇒November 1, Inventory 120 units at $39

November 10, Sale 90 units

COGS = 90 × $39 = $3,510

Remaining inventory = 30 x $39 = $1,170

⇒November 15, Purchase 140 units at $40

November 20, Sale 110 units

COGS = 110 x $40 = $4,400

Remaining inventory = (30 x $40) + (30 x $39) = $2,370

⇒November 24, Sale 45 units

COGS = (30 x $40) + (15 x $39) = $1,785

Remaining inventory = 15 x $39 = $585

⇒November 30, Purchase 160 units at $43

Remaining inventory = $585 + (160 x $43) = $7,465

Hence, the results shows that the Inventory is LOWER when used Last-in, First out Method.

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