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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鈥擣IFO

Requirements

1. Prepare Boston Cycle鈥檚 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

Under a perpetual inventory system, what are the four inventory costing methods, and how does each method determine ending merchandise inventory and cost of goods sold?

Steel Mill began August with 50 units of iron inventory that cost \(35 each. During August, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Aug. 3 Sale 45 \) 85

8 Purchase 90 $ 54

21 Sale 85 88

30 Purchase 15 58

Requirements

1. Prepare a perpetual inventory record for the merchandise inventory using the FIFO inventory costing method.

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鈥� Weighted-average

Requirements

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

Question:Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the following questions:

Requirements

3. If costs had been declining instead of rising, which inventory costing methodwould have produced the highest cost of goods sold?

Question:Antique Carpets鈥檚 books show the following data. In early 2020, auditors found that the ending merchandise inventory for 2017 was understated by \(8,000 and that theending merchandise inventory for 2019 was overstated by \)9,000. The ending merchandiseinventory at December 31, 2018, was correct.

2019

2018

2017

Net Sales Revenue

\( 212,000

\) 161,000

\( 170,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\)22,000

\(28,000

\)41,000

Net cost of purchase

131,000

100,000

86,000

Cost of goods available for sale

153,000

128,000

127,000

Less: Ending Merchandise Inventory

34,000

22,000

28,000

Cost of goods sold

119,000

106,000

99,000

Gross Profit

93,000

55,000

71,000

Operating Expenses

63,000

28,000

39,000

Net Income

\( 30,000

\) 27,000

$ 32,000

Requirements

1. Prepare corrected income statements for the three years.
2. State whether each year鈥檚 net income鈥攂efore your corrections鈥攊s understated oroverstated, and indicate the amount of the understatement or overstatement.

3. Compute the inventory turnover and days鈥� sales in inventory using the correctedincome statements for the three years. (Round all numbers to two decimals.)
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