Click here to review an illustrated example of the FIFO calculation. The steps illustrated in the example are recapped below. 1.  Start with beginning inventory. 2.  Add a layer for each purchase made. 3.  Record cost of merchandise sold as sales occur and adjust layers. 4.  Compute the ending inventory for the period. Below is the data for the month of January, 2011. 1/1 Beg. Inv. 130 Units @ $9 1/8 Purchase 130 Units @ $11 1/14 Sale 104 Units 1/22 Purchase 110 Units @ $9 1/25 Sale 91 Units Compute the FIFO layers amounts for the cost of merchandise available for sale after each purchase and sale. After 1/8 Purchase Layer 1 [removed] units   $ [removed] price per unit   $ [removed] value of the layer Layer 2 [removed] units   $ [removed] price per unit   $ [removed] value of the layer After 1/14 Sale Layer 1 [removed] units   $ [removed] price per unit   $ [removed] value of the layer Layer 2 [removed] units   $ [removed] price per unit    $ [removed] value of the layer After 1/22 Purchase Layer 1 [removed] units   $ [removed] price per unit   $ [removed] value of the layer Layer 2 [removed] units   $ [removed] price per unit   $ [removed] value of the layer Layer 3 [removed] units   $ [removed] price per unit   $ [removed] value of the layer After 1/25 Sale Layer 1 [removed] units   $ [removed] price per unit   $ [removed] value of the layer Layer 2 [removed] units   $ [removed] price per unit   $ [removed] value of the layer Layer 3 [removed] units   $ [removed] price per unit   $ [removed] value of the layer Based on your answers above, complete the worksheet below. FIFO Inventory Worksheet for Month Ending January 2011 Purchases Cost of Merchandise Sold Inventory Balance 1/1 Beg. Inv. 130 Units @ $9 1,170 1/8 Purchase 130 Units @ $11 $ [removed] $ [removed] 1/14 Sale 104 Units $ [removed] $ [removed] 1/22 Purchase 110 Units @ $9 $ [removed] $ [removed] 1/25 Sale 91 Units $ [removed] $ [removed] Total $ [removed] $ [removed] $ [removed] Hide Recording Changes in Inventory under FIFO Valuation Under the perpetual system, two journal entries are are required to record sales; one to record the sale and one to record the cost of merchandise sold. Click on the links below to review the journal entries for purchases and sales transactions. Purchase Sales After a purchase or sale occurs, the transaction must be recorded or journalized. In the following journal, record the purchases and sales for the month assuming that all inventory purchases were made with cash and all sales were made on account at a fixed unit price of $22 per unit. There are several facts to remember: (1) All inventory is purchased with cash, and cash only. (2) All sales are made on account, and on account only. (3) When recording sales, record the revenue portion of the transaction first. Not sure about the account title? Click here to view the chart of accounts. + Assets + Liabilities + Equity + Re.

1. Click here
to review an illustrated example of the FIFO calculation. The
steps illustrated in the example are recapped below.
1. Start with beginning inventory.
2. Add a layer for each purchase made.
3. Record cost of merchandise sold as sales occur and adjust
layers.
4. Compute the ending inventory for the period.
Below is the data for the month of January, 2011.
1/1 Beg. Inv.
130 Units @ $9
1/8 Purchase
130 Units @ $11
1/14 Sale
104 Units
1/22 Purchase
110 Units @ $9
1/25 Sale
91 Units
Compute the FIFO layers amounts for the cost of merchandise
available for sale after each purchase and sale.
After 1/8 Purchase
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $

2. [removed]
value of the layer
After 1/14 Sale
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
After 1/22 Purchase
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 3
[removed]
units $
[removed]

3. price per unit $
[removed]
value of the layer
After 1/25 Sale
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 3
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Based on your answers above, complete the worksheet below.
FIFO Inventory Worksheet for Month Ending January 2011
Purchases
Cost of Merchandise Sold
Inventory Balance
1/1 Beg. Inv.
130 Units @ $9

4. 1,170
1/8 Purchase
130 Units @ $11
$
[removed]
$
[removed]
1/14 Sale
104 Units
$
[removed]
$
[removed]
1/22 Purchase
110 Units @ $9
$
[removed]
$
[removed]
1/25 Sale
91 Units
$
[removed]
$
[removed]
Total
$

5. [removed]
$
[removed]
$
[removed]
Hide
Recording Changes in Inventory under FIFO Valuation
Under the perpetual system, two journal entries are are required
to record sales; one to record the sale and one to record the cost
of merchandise sold. Click on the links below to review the
journal entries for purchases and sales transactions.
Purchase
Sales
After a purchase or sale occurs, the transaction must be
recorded or journalized. In the following journal, record the
purchases and sales for the month assuming that all inventory
purchases were made with cash and all sales were made on
account at a fixed unit price of $22 per unit. There are several
facts to remember:
(1) All inventory is purchased with cash, and cash only.
(2) All sales are made on account, and on account only.
(3) When recording sales, record the revenue portion of the
transaction first.
Not sure about the account title? Click here to view the chart of
accounts.
+
Assets
+

6. Liabilities
+
Equity
+
Revenues/Gains
+
Expenses/Losses
GENERAL JOURNAL
page
DATE
DESCRIPTION
DOC.
NO.
POST.
REF.
DEBIT
CREDIT
1
[removed]
Jan.
08
[removed]

7. [removed]
1
2
[removed]
[removed]
[removed]

8. 2
3
[removed]
3
4
[removed]
Jan. 14 Record revenue
[removed]
[removed]

9. 4
5
[removed]
[removed]
[removed]
5
6
[removed]

10. 6
7
[removed]
Jan. 14 Record cost
[removed]
[removed]
7
8
[removed]

11. [removed]
[removed]
8
9
[removed]

12. 9
10
[removed]
Jan.
22
[removed]
[removed]
10
11
[removed]
[removed]

13. [removed]
11
12
[removed]
12
13
[removed]
Jan. 25 Record revenue
[removed]

14. [removed]
13
14
[removed]
[removed]
[removed]

15. 14
15
[removed]
15
16
[removed]
Jan. 25 Record cost
[removed]
[removed]

16. 16
17
[removed]
[removed]
[removed]
17
18
[removed]

17. 18