In: Accounting
On May 10, Hudson Computing sold 140 Millennium laptop computers to Apex Publishers. At the date of this sale, Hudson’s perpetual inventory records included the following cost layers for the Millennium laptops. Purchase Date Quantity Unit Cost Total Cost Apr. 9 105 $ 1,500 $ 157,500 May 1 45 $ 1,600 72,000 Total on hand 150 $ 229,500
Prepare journal entries to record the cost of the 140 Millennium laptops sold on May 10, assuming that Hudson Computing uses the following.
a. Specific identification method (97 of the units sold were purchased on April 9, and the remaining units were purchased on May 1).
b. Average-cost method.
c. FIFO method.
d. LIFO method.
a) Specific identification method
Cost of goods sold = (97 x 1500) + (43x 1600) = 214,300
Journal Entry
Date |
Accounts Title & Explanation |
Debit |
Credit |
May 10 |
Cost of Goods Sold |
$214,300 |
|
Merchandise Inventory |
$214,300 |
||
(For recording cost of goods sold) |
b) Average cost method
Cost of goods sold = 140 x (229,500/150) = 214,200
Journal Entry -
Date |
Accounts Title & Explanation |
Debit |
Credit |
May 10 |
Cost of Goods Sold |
$214,200 |
|
Merchandise Inventory |
$214,200 |
||
(For recording cost of goods sold) |
C) FIFO Method;
Date |
Accounts Title & Explanation |
Debit |
Credit |
May 10 |
Cost of Goods Sold |
$212,000 |
|
Merchandise Inventory |
$212,000 |
||
(For recording cost of goods sold) |
Working Note;
Cost of goods sold under FIFO, is calculated as follow;
(105 * $1500) + (35 * $1600)
= $157,500 + $56,000
= $213,500
d)LIFO Method
Date |
Accounts Title & Explanation |
Debit |
Credit |
May 10 |
Cost of Goods Sold |
$214,500 |
|
Merchandise Inventory |
$214,500 |
||
(For recording cost of goods sold) |
Working Note;
Cost of goods sold under LIFO, is calculated as follow;
(45 * $1600) + (95 * $1500)
= $72000 + $142500
= $214,500