Question

Mountain Cycles started August with 25 bicycles that cost $65 each. On August 16, Mountain bought 50 bicycles at S80 each. On August 31, Mountain sold 42 bicycles for $99 each. Requirements 1. Prepare Mountain Cycle's perpetual inventory record assuming the company uses the LIFO inventory costing method. 2.Journalize the August 16 purchase of merchandise inventory on account and the August 31 sale of merchandise inventory on account. Requirement 1. Prepare Mountain 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 QuantityTot. Total) Mountain Cycles Purchases Cost of Goods Sold on Hand Date QTY Unit Cost Tot. Cost QTY Unit Cost Tot. CostQTY Unit Cost Tot. Cost 25 S 25 $651,625 50 S80 4,000 65 S1,625 Aug. 16 S 80S 4,000 Aug. 31

Answer 1

Answer

Purchase Cost of Goods Sold Inventory on Hand Date tyUnit Cost Total CostQty Unit Cost Total Cost Qty Unit CostTotal Cost 1,625 1,625 4,000 1,625 640 2,265 25 65.00 25 65.00 50 80.00 25 $ 65.00 8 80.00 Aug 1 50 $80.00 4,000 Aug 16 80.00 3,360 5 65.00 Aug 31 Total 50 80.00 4,000 42 80 3,360 Beginning Inventory 1,625 Add: Purchases Less: Cost of Goods Sold 3,360 4,000 Ending Inventory 2,265

Cost of goods Sold under LIFO will be from latest purchase

Cost of goods Sold = 42 units x $80 = $3,360

Sales = 42 units x $99 = $4,158

Journal Entry

a. Merchandise Inventory ....Dr. $4,000

Accounts Payable....Cr. $4,000

b. Accounts Receivable....Dr. $4,158

Sales Revenue....Cr. $4,158

c. Cost of goods Sold....Dr. $3,360

Merchandise Inventory...Cr. $3,360