Questions: Vaughn Department Store uses a perpetual inventory system. Data for product E2-02 include the following purchases: Date Number of Units Unit Cost May 7 55 15 July 28 30 18 On June 1, Vaughn sold 25 units, and on August 27, 46 more units. Prepare the perpetual inventory schedule for the above transactions using FIFO.

Vaughn Department Store uses a perpetual inventory system. Data for product E2-02 include the following purchases:

Date Number of Units Unit Cost
May 7 55 15
July 28 30 18

On June 1, Vaughn sold 25 units, and on August 27, 46 more units.

Prepare the perpetual inventory schedule for the above transactions using FIFO.

Transcript text: Vaughn Department Store uses a perpetual inventory system. Data for product E2-02 include the following purchases: Date Number of Units Unit Cost May 7 55 $15 July 28 30 18 On June 1, Vaughn sold 25 units, and on August 27, 46 more units. Prepare the perpetual inventory schedule for the above transactions using FIFO.

Solution

Solution Steps

To prepare the perpetual inventory schedule using the FIFO (First-In, First-Out) method, we need to track the inventory and cost of goods sold (COGS) over the given transactions. Start by recording the initial purchase, then subtract the units sold on June 1 from the oldest inventory (May 7 purchase). Next, add the July 28 purchase to the inventory. Finally, subtract the units sold on August 27, again using the oldest available inventory first.

Step 1: Record Initial Inventory

On May 7, Vaughn Department Store purchased 55 units at a unit cost of $15. The initial inventory value is calculated as: \[ 55 \times 15 = 825 \] Thus, the initial inventory balance is $825.

Step 2: Calculate Cost of Goods Sold on June 1

On June 1, 25 units were sold. Using the FIFO method, these units are taken from the May 7 purchase. The cost of goods sold (COGS) for this transaction is: \[ 25 \times 15 = 375 \] After this sale, the remaining inventory from the May 7 purchase is: \[ 55 - 25 = 30 \text{ units} \]

Step 3: Record Additional Purchase on July 28

On July 28, an additional 30 units were purchased at a unit cost of $18. The inventory now consists of:

30 units at $15 (remaining from May 7)
30 units at $18 (new purchase)

Step 4: Calculate Cost of Goods Sold on August 27

On August 27, 46 units were sold. Using FIFO, the first 30 units are taken from the remaining May 7 inventory, and the next 16 units are taken from the July 28 purchase. The COGS for this transaction is: \[ (30 \times 15) + (16 \times 18) = 450 + 288 = 738 \] After this sale, the remaining inventory is: