Question

Question:This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and continued through Chapter 5.

Consider the December transactions for Crystal Clear Cleaning that were presentedin Chapter 5. (Cost data have been removed from the sale transactions.) Crystal Clearuses the perpetual inventory system.

Dec. 2 Purchased 1,000 units of inventory for \(4,000 on account from Sparkle

Company on terms, 5/10, n/20.

5 Purchased 1,200 units of inventory from Borax on account with terms

4/10, n/30. The total invoice was for \)6,000, which included a \(300

freight charge.

7 Returned 300 units of inventory to Sparkle from the December 2

purchase.

9 Paid Borax.

11 Sold 500 units of goods to Happy Maids for \)5,500 on account with

termsn/30.

12 Paid Sparkle.

15 Received 100 units with a sales price of \(1,100 of goods back from

customer Happy Maids.

21 Received payment from Happy Maids, settling the amount due in full.

28 Sold 500 units of goods to Bridget, Inc. on account for \)6,500. Terms

1/15,n/30.

29 Paid cash for utilities of \(550.

30 Paid cash for Sales Commission Expense of \)214.

31 Received payment from Bridget, Inc., less discount.

31 Recorded the following adjusting entries:

a. Physical count of inventory on December 31 showed 800 units of

goods on hand.

b. Depreciation, \(150.

c. Accrued salaries expense of \)2,100.

d. Estimated sales returns of \(1,500, with cost of \)540.

e. Prepared all other adjustments necessary for December (Hint: You willneed to review the adjustment information in Chapter 3 to determinethe remaining adjustments). Assume the cleaning supplies left atDecember 31 are $50.

Requirements

1. Prepare perpetual inventory records for December for Crystal Clear Cleaning usingthe FIFO inventory costing method. (Note: You must calculate the cost of goodssold on the 11th, 28th, and 31st (adjusting entry a).) Round per unit costs to twodecimal places.

Short answer

The cost of goods sold on the 11^th, 28^th, and 31^st of Decemberamounts to$2,000, $2,300, and $1,000 respectively and total COGS at the end of the period amounts to $6,500.

Step-by-step solution

FIFO Method

FIFO is the acronym for first in first out. This is the method for computing inventory cost assuming that the inventories are used in the sequential order as procured.

So, this method computed the COGS at the historical prices.

Perpetual Inventory record using FIFO

Date	Purchase/opening			Sales			Balance
	Units	Cost per unit	Amount	Units	Cost per unit	Amount	Units	Cost per unit	Amount
Dec 2	1,000	$ 4	$ 4,000				1,000	$ 4	$ 4,000
5	1,200	5	6,000				1,000 1,200	4 5	10,000
7				300	$ 4	$ 1,200	700 1,200	4 5	8,800
11				500	4	2,000	200 1,200	4 5	6,800
15	100	5	500				200 1300	4 5	7,300
28				200 300	4 5	2,300	1000	5	5,000
31				200	5	1,000	800	5	4,000
Total	2,300		$10,500	1,500		6,500	800	5	4,000