Question

Hercula Cycles started August with 25 bicycles that cost $ 65 each. On August 16 Hercula bought 50 bicycles at $80 each. On August 31Hercula sold 38 bicycles for $100 each.

Journalize the August 16 purchase of merchandise inventory on account and the August 31 sale of merchandise inventory on account.

Prepare Hercula ?Cycle's perpetual inventory record assuming the company uses the? weighted-average inventory costing method. Start by entering the beginning inventory balances. Enter the transactions in chronological? order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual? record, calculate the quantity and total cost of inventory? purchased, sold, and on hand at the end of the period.

Answer 1

1. Perpetual inventory record
Hercula Cycles
Date	Purchases			Cost of Goods Sold			Inventory on Hand
	QTY	Unit Cost	Total Cost (QTY x unit cost)	QTY	Unit Cost	Total Cost (QTY x unit cost)	QTY	Unit Cost	Total Cost (QTY x unit cost)
Aug. 1							25	$65	$1,625
Aug. 16	50	$80	$4,000				75	$75 {Refer working note]	$5,625
Aug. 31				38	$75	$2,850	37 [75 units - 38 units]	$75	$2,775
Totals	50		$4,000	38		$2,850	37		$2,775

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2. Journal entries
Date	Accounts and Explanation	Debit	Credit
Aug. 16	Inventory / Merchandise inventory   [50 units x $80]	$4,000
	Accounts payable		$4,000
	(To record purchase of inventory on account)
Aug. 31	Accounts receivable       [38 units x $100]	$3,800
	Sales revenue		$3,800
	(To record sales on account)
	Cost of Goods Sold         [38 units x $75]	$2,850
	Inventory / Merchandise inventory		$2,850
	(To record cost of goods sold)

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