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Chapter 6: 4SE_1 (page 358)

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. Prepare Boston Cycle’s perpetual inventory record assuming the company uses theFIFO inventory costing method.

Short Answer

Expert verified

The cost of goods sold under the FIFO method amounts to $2,000.

Step by step solution

01

Step-by-Step-SolutionStep1: FIFO costing method

FIFO is another costing method that estimates the inventory cost in the chronological order of acquiring inventory. The cost of ending inventory under this method is based on the recently purchased inventory.

02

Perpetual inventory record based on the FIFO method

Date

Purchase / Opening inventory

Sale

Balance

Unit

Cost

Amount

Unit

Cost

Amount

Unit

Cost

Amount

Oct 1

12

$42

$504

12

$42

$504

Oct 16

40

$68

$2,720

12

40

$42

$68

$3,224

Oct 31

12

22

$42

$68

$2,000

18

$68

$1,224

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Most popular questions from this chapter

When using a perpetual inventory system and the weighted-average inventory costing method, when does the business compute a new weighted-average cost per unit?

Question:Assume that Toys Galore store bought and sold a line of dolls during December as follows:

Dec. 1 Beginning merchandise inventory 13 units @ \( 9 each

8 Sale 8 units @ \) 22 each

14 Purchase 16 units @ \( 14 each

21 Sale 14 units @ \) 22 each

Requirements

5. Which method results in a higher gross profit?

Some of M and C Electronics’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is \(24,000 below the business’s cost of the goods, which was \)97,000. Before any adjustments at the end of the period, the company’s Cost of Goods Sold account has a balance of $380,000.

Requirements

1. Journalize any required entries.

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

2. Compute cost of goods sold and gross profit using the LIFO inventory costing method.

Nutriset Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing its financial statements for the year ended March 31, 2019, Nutriset’s preliminary income statement, before the year-end adjustments, appears as follows:

NUTRISET FOODS

Income Statement (Partial)

Year Ended March 31, 2019

Net Sales Revenue \( 118,000

Cost of Goods Sold 47,000

Gross Profit \) 71,000

Nutriset has determined that the current replacement cost of ending merchandise inventory is \(19,500. Cost is \)24,000.

Requirements

1. Journalize the adjusting entry for merchandise inventory, if any is required.
See all solutions

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