The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows:DateTransactionNumber of UnitsPer UnitTotalJan.1Inventory7,500$ 75.00$ 562,500 10Purchase22,50085.001,912,500 28Sale11,250150.001,687,500 30Sale3,750150.00562,500Feb.5Sale1,500150.00225,000 10Purchase54,00087.504,725,000 16Sale27,000160.004,320,000 28Sale25,500160.004,080,000Mar.5Purchase45,00089.504,027,500 14Sale30,000160.004,800,000 25Purchase7,50090.00675,000 30Sale26,250160.004,200,000 Instructions1.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?CHART OF ACCOUNTSMidnight SuppliesGeneral Ledger ASSETS110Cash111Petty Cash120Accounts Receivable131Notes Receivable132Interest Receivable141Inventory145Office Supplies146Store Supplies151Prepaid Insurance181Land191Office Equipment192Accumulated Depreciation-Office Equipment193Store Equipment194Accumulated Depreciation-Store Equipment LIABILITIES210Accounts Payable221Notes Payable222Interest Payable231Salaries Payable241Sales Tax Payable EQUITY310Common Stock311Retained Earnings312Dividends REVENUE410Sales610Interest Revenue EXPENSES510Cost of Goods Sold515Credit Card Expense516Cash Short and Over520Salaries Expense531Advertising Expense532Delivery Expense533Insurance Expense534Office Supplies Expense535Rent Expense536Repairs Expense537Selling Expenses538Store Supplies Expense561Depreciation Expense-Office Equipment562Depreciation Expense-Store Equipment590Miscellaneous Expense710Interest Expense3. Determine the gross profit from sales for the period. **FIFO Inventory Management: Educational Exercise****Instructions:**1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated, using the first-in, first-out (FIFO) method. Under FIFO, if units are sold, the earliest purchased are sold first and reported in the Inventory Unit Cost column.**Table Explanation:**The table is divided into three main columns, each with specific details:- **Date**: Shows the relevant dates for inventory activities. - **Purchases**: - **Quantity**: The number of units purchased on January 10 is 22,500. - **Unit Cost**: The cost per unit is $85.00. - **Total Cost**: The total purchase cost amounts to $1,912,500.- **Cost of Goods Sold**: Fields are currently empty, awaiting transaction data to be filled based on sales activity using the FIFO method.**Note**: The rows are designed to be filled as transactions occur, providing a clear view of inventory levels and cost of goods sold over time. **Journal Entry Exercise****Task:**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.*Question not attempted.*---**Journal Table:**- **Columns:** - Date - Description - Post. Ref. - Debit - Credit - Assets - Liabilities - Equity**Score: 0/51**This exercise involves filling out a journal table where each row will correspond to a particular transaction event. Use the guidance given above to input the correct details. The table is currently blank and needs to be completed as per the instructions. Remember to refer to the Chart of Accounts for accurate account titles.

Name: The beginning inventory at Midnight Supplies and data on purchases and
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Description: The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows:DateTransactionNumber of UnitsPer UnitTotalJan.1Inventory7,500$ 75.00$ 562,500 10Purchase22,50085.001,912,500 28Sale1

Solution 1: Computation of ending inventory COGS under FIFO - Midnight…

The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows: Date Transaction Number of Units Per Unit Total Jan. 1 Inventory 7,500 $ 75.00 $ 562,500 10 Purchase 22,500 85.00 1,912,500 28 Sale 11,250 150.00 1,687,500 30 Sale 3,750 150.00 562,500 Feb. 5 Sale 1,500 150.00 225,000 10 Purchase 54,000 87.50 4,725,000 16 Sale 27,000 160.00 4,320,000 28 Sale 25,500 160.00 4,080,000 Mar. 5 Purchase 45,000 89.50 4,027,500 14 Sale 30,000 160.00 4,800,000 25 Purchase 7,500 90.00 675,000 30 Sale 26,250 160.00 4,200,000 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The beginning inventory at Midnight Supplies and data on purchases and sales for a three month period ending March 31 are as follows:

Date	Transaction	Number of Units	Per Unit	Total
Jan.	1	Inventory	7,500	$ 75.00	$ 562,500
	10	Purchase	22,500	85.00	1,912,500
	28	Sale	11,250	150.00	1,687,500
	30	Sale	3,750	150.00	562,500
Feb.	5	Sale	1,500	150.00	225,000
	10	Purchase	54,000	87.50	4,725,000
	16	Sale	27,000	160.00	4,320,000
	28	Sale	25,500	160.00	4,080,000
Mar.	5	Purchase	45,000	89.50	4,027,500
	14	Sale	30,000	160.00	4,800,000
	25	Purchase	7,500	90.00	675,000
	30	Sale	26,250	160.00	4,200,000

	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?

CHART OF ACCOUNTS

Midnight Supplies

General 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

	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

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

**FIFO Inventory Management: Educational Exercise**

**Instructions:**

1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated, using the first-in, first-out (FIFO) method. Under FIFO, if units are sold, the earliest purchased are sold first and reported in the Inventory Unit Cost column.

**Table Explanation:**

The table is divided into three main columns, each with specific details:

- **Date**: Shows the relevant dates for inventory activities.

- **Purchases**:
- **Quantity**: The number of units purchased on January 10 is 22,500.
- **Unit Cost**: The cost per unit is $85.00.
- **Total Cost**: The total purchase cost amounts to $1,912,500.

- **Cost of Goods Sold**: Fields are currently empty, awaiting transaction data to be filled based on sales activity using the FIFO method.

**Note**: The rows are designed to be filled as transactions occur, providing a clear view of inventory levels and cost of goods sold over time.

**Journal Entry Exercise**

**Task:**

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.

*Question not attempted.*

---

**Journal Table:**

- **Columns:**
- Date
- Description
- Post. Ref.
- Debit
- Credit
- Assets
- Liabilities
- Equity

**Score: 0/51**

This exercise involves filling out a journal table where each row will correspond to a particular transaction event. Use the guidance given above to input the correct details. The table is currently blank and needs to be completed as per the instructions. Remember to refer to the Chart of Accounts for accurate account titles.

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