Question

Boston Cycles started October with 12 bicycles that cost $42 each. On October 16, Boston bought 40 bicycles at $68 each. On October 31, Boston sold 34 bicycles for $100 each. Preparing a perpetual inventory record and journal entries—FIFO Requirements

1.PrepareBostonCycle’sperpetualinventoryrecordassumingthecompanyusesthe FIFO inventory costing method.

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

S6-5 Preparing a perpetual inventory record and journal entries—LIFO Requirements

1. PrepareBostonCycle’sperpetualinventoryrecordassumingthecompanyusesthe LIFO inventory costing method.

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

Answer 1

Solution:

Requirement 1:

As per FIFO Inventory System

Date	Purchases			Cost of Goods Sold			Inventory on Hand
	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Oct. 1							12	$           42	$           504
Oct. 16	40	$          68	$    2,720				12	$           42	$           504
							40	$           68	$        2,720
Oct. 31				12	$           42	$           504	18	$           68	$        1,224
				22	$           68	$        1,496
Totals	40	$          68	$    2,720	34		$        2,000	18	$           68	$        1,224

Journal Entries:

Date	Account Titles and Explanation	Debit	Credit
Oct. 16	Inventory	$          2,720
	Account Payable		$          2,720
	(To record inventory purchased)
Oct. 31	Account Receivable [$ 34*100 ]	$          3,400
	Sales		$          3,400
	(To record sales made)
Oct. 31	Cost Of Goods Sold	$          2,000
	Inventory		$          2,000
	( To record Cost of goods sold)

Requirement 2:

As per LIFO Inventory System

Date	Purchases			Cost of Goods Sold			Inventory on Hand
	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Oct. 1							12	$           42	$           504
Oct. 16	40	$          68	$    2,720				12	$           42	$           504
							40	$           68	$        2,720
Oct. 31				34	$           68	$        2,312	6	$           68	$           408
							12	$           42	$           504
Totals	40	$          68	$    2,720	34		$        2,312	18		$           912

Journal Entries:

Date	Account Titles and Explanation	Debit	Credit
Oct. 16	Inventory	$          2,720
	Account Payable		$          2,720
	(To record inventory purchased)
Oct. 31	Account Receivable [$ 34*100 ]	$          3,400
	Sales		$          3,400
	(To record sales made)
Oct. 31	Cost Of Goods Sold	$          2,312
	Inventory		$          2,312
	( To record Cost of goods sold)