PE 7-2A Perpetual inventory using FIFO

Beginning inventory, purchases, and sales for Item B901 are as follows:

   Aug. 1 Inventory 50 units at $80
9 Sale         30 units
13 Purchase  40 units at $85
28 Sale         25 units

Assuming a perpetual inventory system and using the first-in, first-out (FIFO) method, determine (a) the cost of merchandise sold on August 28 and (b) the inventory on August 31.

Answer:
a. Cost of merchandise sold (August 28):

20 units @ $80 $1,600  
5 units @ $85       425
25                   $2,025

b. Inventory, August 31: $2,975 = 35 units × $85

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