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Question:This problem continues the Canyon Canoe Company situation from Chapter 5. At the beginning of the January 2019, Canyon Canoe Company decided to carry and sellT-shirts with its logo printed on them. Canyon Canoe Company uses the perpetualinventory system to account for the inventory. During February 2019, Canyon CanoeCompany completed the following merchandising transactions:

Feb. 2 Sold 60 T-shirts at \(10 each.

5 Purchased 50 T-shirts at \)6 each.

7 Sold 45 T-shirts for \(10 each.

8 Sold 20 T-shirts for \)10 each.

10 Canyon Canoe Company realized the inventory was running

low, so it placed a rush order and purchased 20 T-shirts. The

premium cost for these shirts was \(7 each.

12 Placed a second rush order and purchased 40 T-shirts at \)7

each.

13 Sold 20 T-shirts for \(10 each.

15 Purchased 50 T-shirts for \)6 each.

20 In order to avoid future rush orders, purchased 150 T-shirts.

Due to the volume of the order, Canyon Canoe Company

was able to negotiate a cost of \(5 each.

21 Sold 40 T-shirts for \)10 each.

22 Sold 35 T-shirts for \(10 each.

24 Sold 20 T-shirts for \)10 each.

25 Sold 45 T-shirts for \(10 each.

27 Sold 40 T-shirts for \)10 each.

Requirements

1. Assume Canton Canoe Company began February with 94 T-shirts in inventorythat cost $5 each. Prepare the perpetual inventory records for February using theFIFO inventory costing method.

Step by step solution

01

Perpetual inventory method

The perpetual inventory method is a system of updating inventory records continuously after every purchase and sale. Unlike the periodic system, the perpetual method keeps a record of the cost of goods sold at every sales level.

02

Perpetual inventory record under FIFO

Date	Purchase/opening			Sales			Balance
	Units	Cost per unit	Amount	Units	Cost per unit	Amount	Units	Cost per unit	Amount
Feb 1	94	$ 5	$ 470				94	$ 5	$ 470
2				60	$ 5	$ 300	34	5	170
5	50	6	$ 300				34 50	5 6	470
7				34 11	5 6	236	39	6	234
8				20	6	120	19	6	114
10	20	7	140				19 20	6 7	254
12	40	7	280				19 60	6 7	534
13				19 1	6 7	121	59	7	413
15	50	6	300				59 50	7 6	713
20	150	5	750				59 50 150	7 6 5	1,463
21				40	7	280	19 50 150	7 6 5	1,183
22				19 16	7 6	229	34 150	6 5	954
24				20	6	120	14 150	6 5	834
25				14 31	6 5	239	119	5	595
27				40	5	200	79	5	395
Total	404		$ 2,240	325		$ 1,845	79	5	395

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