Question

Using the attached T-account template, prepare the entries to recognize the following transactions for ABC Company with respect to Inventory Item # 1234

Date	Transaction	Quantity	Purchase Price	Selling Price
1/1/17	Beginning Inventory	1,500	$10
1/10/17	Purchase	2,500	$15
1/12/17	Sale	(3,000)		$30
1/19/17	Purchase	2,000	$20
1/23/17	Sale	(500)		$31
1/29/17	Sale	(1,700)		$34

Use separate T-account templates to prepare the entries under the following criteria:

a. Periodic system, FIFO cost flow method

b. Perpetual system, FIFO cost flow method

c. Periodic system, LIFO cost flow method

d. Perpetual system, LIFO cost flow method

Answer 1

a. Periodic system under FIFO cost flow method:

January 10, 2017:

Purchases (2500 units * $15) 37500   

Accounts payable 37500

January 12, 2017:

Accounts receivable (3000*30) 90,000

sales 90,000

January 19, 2017:

Purchases  (2000 units * $20) 40,000   

Accounts payable 40,000

January 23, 2017:

Accounts receivable (500*31) 15,500

sales 15,500

January 29, 2017:

Accounts receivable (1700*34) 57,800

sales 57,800

January 31, 2017:

Inventory(Ending) (800*10) 8,000   

Cost of goods sold (15000+37500+40000-8000) 84500

Purchases 77500

Inventory(beginning) 15000

b. Perpetual system under FIFO cost flow method:

January 10, 2017:

Inventory (2500 units * $15) 37500

Accounts Payable 37500

January 12, 2017:

According to FIFO assumption, first costs incurred are first costs expensed, the cost of 3000 units sold on 12 January would, therefore, be computed as follows:

Cost of 1500 units (from beginning inventory): 1500 units × $10 = $15,000

Cost of 1500 units (from units purchased on January 10): 1500 units × $15 = $22,500

Total cost of 3000 units sold on January 12: $15,000 + $22,500 = $37,500

Accounts receivable (3000 units * $30) 90,000

Sales 90,000

Cost of goods sold 37,500

Inventory 37,500

January 19, 2017:

Inventory (2000 units * $20) 40,000

Accounts Payable 40,000

January 23, 2017:

According to FIFO assumption, first costs incurred are first costs expensed, the cost of 500 units sold on 23 January would, therefore, be computed as follows:

Cost of 500 units (from January 10 purchase): 500 units × $15 = $7,500

Accounts receivable (500 units * $31) 15,500

Sales 15,500

Cost of goods sold 7,500

Inventory 7,500

January 29, 2017:

According to FIFO assumption, first costs incurred are first costs expensed, the cost of 1700 units sold on 29 January would, therefore, be computed as follows:

Cost of 500 units (from January 10 purchase): 500 units × $15 = $7,500

Cost of 1200 units (from units purchased on January 19): 1200 units × $20 = $24,000

Total cost of 3000 units sold on January 12: $7,500 + $24,000 = $31,500

Accounts receivable (1700 units * $34) 57,800

Sales 57,800

Cost of goods sold 31,500

Inventory 31,500

c.Periodic system under LIFO cost flow method:

January 10, 2017:

Purchases  (2500 units * $15) 37500   

Accounts payable 37500

January 12, 2017:

Accounts receivable (3000*30) 90,000

sales 90,000

January 19, 2017:

Purchases  (2000 units * $20) 40,000   

Accounts payable 40,000

January 23, 2017:

Accounts receivable (500*31) 15,500

sales 15,500

January 29, 2017:

Accounts receivable (1700*34) 57,800

sales 57,800

January 31, 2017:

Inventory(Ending) (800*10) 8,000   

Cost of goods sold (15000+37500+40000-8000) 84500

Purchases 77500

Inventory(beginning) 15000

d. Perpetual system under LIFO cost flow method:

January 10, 2017:

Inventory (2500 units * $15) 37500

Accounts Payable 37500

January 12, 2017:

According to LIFO assumption, last costs incurred are first costs expensed, the cost of 3000 units sold on 12 January would, therefore, be computed as follows:

Cost of 2500 units (from units purchased on January 10): 2500 units × $15 = $37,500

Cost of 500 units (from beginning inventory): 500 units × $10 = $5000

Total cost of 3000 units sold on January 12: $37,500 + $5000 = $42,500

Accounts receivable (3000 units * $30) 90,000

Sales 90,000

Cost of goods sold 42,500

Inventory 42,500

January 19, 2017:

Inventory (2000 units * $20) 40,000

Accounts Payable 40,000

January 23, 2017:

According to LIFO assumption, last costs incurred are first costs expensed, the cost of 500 units sold on 23 January would, therefore, be computed as follows:

Cost of 500 units (from January 19 purchase): 500 units × $20 = $10,000

Accounts receivable (500 units * $31) 15,500

Sales 15,500

Cost of goods sold 10,000

Inventory 10,000

January 29, 2017:

According to LIFO assumption, last costs incurred are first costs expensed, the cost of 1700 units sold on 29 January would, therefore, be computed as follows:

Cost of 1500 units (from January 19 purchase): 1500 units × $20 = $30,000

Cost of 200 units (from beginning balance): 200 units × $10 = $2,000

Total cost of 3000 units sold on January 12: $30,000 + $2,000 = $32,000

Accounts receivable (1700 units * $34) 57,800

Sales 57,800

Cost of goods sold 32,000

Inventory 32,000