Question

 

The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations

Jan. 20	Purchased	490	units	@	$	8	=	$	3,920
Apr. 21	Purchased	290	units	@	$	10	=		2,900
July 25	Purchased	370	units	@	$	13	=		4,810
Sept. 19	Purchased	180	units	@	$	15	=		2,700

During the year, The Shirt Shop sold 1,080 T-shirts for $24 each.

PART I.) Compute the amount of ending inventory The Shirt Shop would report on the balance sheet, assuming the following cost flow assumptions: (1) FIFO, (2) LIFO, and (3) weighted average. (Round cost per unit to 2 decimal places and final answers to the nearest whole dollar amount.)

PART II.) Record the above transactions in general journal form using FIFO method

PART III.) Record the above transactions in general journal form using LIFO method. Assume all transactions are cash transactions.

PART IV.) Record the above transactions in general journal form using weighted average method. Assume all transactions are cash transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round cost per unit to 2 decimal places and final answers to the nearest whole dollar amount.)

PART V.) post to T-accounts using FIFO method. Assume all transactions are cash transactions.

PART VI.) Post to T-accounts using LIFO method. Assume all transactions are cash transactions.

PART VII.) Post to T-accounts using weighted average method. Assume all transactions are cash transactions. (Round cost per unit to 2 decimal places and final answers to the nearest whole dollar amount.)

 

Answer 1

Part I ending inventory :-

1. As per FIFO method

Date	Transaction type	Quantity	rate	amount
Jan 20	purchased	490	8	3920
April 21	purchased	290	10	2900
July 25	Purchased	370	13	4810
Sept 19	Purchased	180	15	2700
	Sales (cost)	490	8	3920
	Sales (cost)	290	10	2900
	Sales (cost)	300	13	3900
	Total cost of goods soldp
	Ending inventory :-
	Purchased on July 24 (a)	70	13	910
	Purchased on Sept 19 (b)	180	15	2700
	Total closing balance of inventory (a+b)			3610

2 . LIFO method

Date	transaction type	Quantity	rate	amount
Jan 20	purchases	490	8	3920
Apr 21	purchases	290	10	2900
July 25	purchases	370	13	4810
Sept 19	purchases	180	15	2700
	Sales (cost)	180
	Sales (cost)	370
	Sales (cost)	290
	Sales (cost)	240
	Ending inventory :-
	Purchased on	250	8	2000
	Cost of goods sold

Therefore, balance to be shown in balance sheet as inventory as per LIFO method is amounting to $2000.

3. Weighted average method

Date	transaction type	Quantity	rate	amount
Jan 20	purchases	490	8	3920
Apr 21	purchases	290	10	2900
July 25	purchases	370	13	4810
Sept 19	purchases	180	15	2700
	Average	1330	10.77	14330
	Sales (cost)	1080	10.77	12631.6
	Ending inventory	250	10.77	2692.5

Ending inventory to be shown in balance sheet by weighted average method will amount to $2692.5

Part II . Journal entries as per FIFO method will be :-

Date	General journal	debit	credit
Jan 20	Merchandise inventory To cash (Beingn 490 units purchased @8 per unit)	3920	3920
Apr 21	merchandise inventory To cash (Being 290 units purchased @10 per unit)	2900	2900
July 25	merchandise inventory To cash (Being 370 units purchased @13)	4810	4810
Sept 19	merchandise inventory To cash (Being 180 units purchased @ 15 per unit)	2700	2700
Sept	Cash To sales (Being 1080 units sold @24)	25920	25920
Sept	cost of goods sold To merchandise inventory	10720	10720

Part III Journal entries as per LIFO method :-

Date	account title	debit	credit
Jan 20	merchandise inventory To cash (Being 490 units purchased @8 per unit)	3920	3920
Apr 21	merchandise inventory To cash (Being 290 units@10 per unit purchased)	2900	2900
July 25	merchandise inventory To cash (Being 370 units@13 per unit purchased)	4810	4810
Sept 19	merchandise inventory To cash (Being 180 units @ 15 purchased)	2700	2700
Sept	cash To sales (Being sales of 1080 units @24)	25920	25920
Sept	cost of goods sold To merchandise inventory (Being cost of goods sold)	12330	12330

Part IV . Journal entries as per weighted average method

Date	general journal	debit	credit
Jan 20	merchandise inventory To cash	3920	3920
Apr 21	merchandise inventory To cash	2900	2900
July 25	merchandise inventory To cash	4810	4810
Sept 19	merchandise inventory To cash	2700	2700
Sept	cash To sales	25920	25920
Sept	cost of goods sold To merchandise inventory (Being cost of goods sold)	12631.6	12631.6

Part V . Posting to t accounts in FIFO

Merchandise inventory account

Date	particulars	debit	date	particulars	Credit
Jan 20	to cash	3920	sept	by cost of goods sold	10720
Apr 21	To cash	2900	Sept 30	by Bal c/d	3610
July 25	to cash	4810
Sept 19	to cash	2700

Part VI T account as per LIFO method

Merchandise inventory

Date	particulars	debit	date	particulars	credit
Jan 20	to cash	3920	sept	by cost of goods sold	12330
Apr 21	to cash	2900		By bal c/d	2000
July 25	to cash	4810
Sept 19	to cash	2700

Part VII T accounts aa peras per weighted average

Merchandise inventory

Date	particulars	debit	date	Particulars	credit
Jan 20	to cash	3920	sept	by cost of goods sold	12631.6
Apr 21	To cash	2900	sept 30	by bal c/d	1698.4
July 25	to cash	4810
Sept 19	to cash	2700