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