Question

California Cycles started May with 5 bicycles that cost $48 each. On May 16, California bought 30 bicycles at $55 each. On May 31, California sold 29 bicycles for $95 each. Requirements 1. Prepare California Cycle's perpetual inventory record assuming the company uses the FIFO inventory costing method. 2. Journalize the May 16 purchase of merchandise inventory on account and the May 31 sale of merchandise inventory on account. Requirement 1. Prepare California Cycle's perpetual inventory record assuming the company uses the FIFO 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. (Enter the oldest inventory layers first. Abbreviation used: QTY = Quantity; Tot. = Total) California Cycles Purchases Cost of Goods Sold QTY Unit Cost Tot. Cost Inventory on Hand QTY Unit Cost Tot. Cost QTY Unit Cost Tot. Cost Date May 1 May 16 May 31 Totals

Answer 1

Requirement 1.
California Cycles
	Purchase			Cost of Goods Sold			Inventory
Date	Qty.	Unit Cost	Total Cost	Qty.	Unit Cost	Total Cost	Qty.	Unit Cost	Total Cost
May. 5							5	$48	$240
May. 16	30	$55	$1,650				5	$48	$240
							30	$55	$1,650
May. 31				5	$48	$240
				24	$30	$720	6	$55	$330
Totals	30		$1,650	29		$960	6		$330

Requirement 2.
Date	Accounts & Explanation	Debit	Credit
May. 16	Merchandise Inventory (30 Cycles * $55 each)	$1,650
	Accounts Payable		$1,650
	(To record purchase of cycles )
May. 31	Accounts Receivable ( 29 Cycles * $95 each)	$2,755
	Merchandise Inventory		$2,755
	(To record sales of cycles )

Expenses Related to Sales	Debit	Credit
Cost of Goods Sold (See Requirement 1)	$960
Merchandise Inventory		$960
(To recording of Cost of Goods Sold )