Question

Cycles started with bicycles that cost each. On purchased bicycles at each. On sold bicycles for each.

Requirements
1.
Prepare ​Cycle's perpetual inventory record assuming the company uses the LIFO inventory costing method.
2.
Journalize the purchase of merchandise inventory on account and the sale of merchandise inventory on account.
Question content area bottom
Part 1
Requirement 1. Prepare ​Cycle's perpetual inventory record assuming the company uses the LIFO inventory costing method.
Start by entering the beginning inventory balances. Enter the transactions in chronological​ order, calculating new inventory on hand balances after each transaction. Once all of the transactions have been entered into the perpetual​ record, calculate the quantity and total cost of inventory​ purchased, sold, and on hand at the end of the period. ​(For cost of goods​ sold, enter the first layer out under LIFO costing first. For inventory on​ hand, enter the oldest inventory layer first. Abbreviation​ used: QTY​ = Quantity; Tot.​ = Total)

Answer 1

1. Boston Cycle's perpetual inventory record assuming the company uses the LIFO inventory costing method is as follows:

Purchases:

October 16 Accounts Payable = $2,720 (40 x $68)

Inventory:

October 1: Beginning balance = $504 (12 x $42)

Cost of goods sold:

October 31: Sales = $2,312 (34 x $68)

Sales Revenue:

October 31: Accounts Receivable = $3,400 (34 x $100)

2. Journalizing the October 16 purchase of merchandise inventory on the account and the October 31 sale of merchandise inventory on the account is as follows:

Date Account Titles Debit Credit

October 16 Inventory $2,720

Accounts Payable $2,720

(To record the purchase of merchandise on account.)

October 31 Cost of goods sold $2,312

Inventory $2,312

(To record the cost of goods sold.)

October 31 Accounts Receivable $3,400

Sales Revenue $3,400

(To record the sale of goods on account.)

Transaction Analysis:

October 16 Inventory $2,720 Accounts Payable $2,720

October 31 Cost of goods sold $2,312 Inventory $2,312

October 31 Accounts Receivable $3,400 Sales Revenue $3,400

Thus, the purchases have been recorded using the LIFO inventory method that recognizes the sale of goods using the last inventory as the ones sold first.

Complete Question:

Boston Cycles started in 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. Requirements 1. Prepare Boston Cycle's perpetual inventory record assuming the company uses the 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.