Question

( PRODUCT DEACTIVATE Navigation Sam's No matches Headings Pages Not yet answered Marked out of 20.00 F Flag question Create an interactive It's a great way to kee move your content To get started, go to to the headings in The following transactions apply to Sam's Skateboards. 1-Jan Beginning inventory 50 units @ $120 12-Jan Purchase 30 units @ $104 19-Mar Sales 60 units @ $190 8-Jun Purchase 20 units @ $116 4-Nov Sales 35 units @ $200 Assume the use of the perpetual inventory method and that all transactions were for cash. Required: a) Prepare the journal entries for the above transact[ons, assuming a FIFO cost flow. b) Determine the amount of ending inventory using a FIFO cost flow. 1 Αν B 1 !!! li

Answer 1

Solution

Sam’s Skateboards

Journal entries assuming a FIFO cost flow –

a. Journal entries assuming a FIFO cost flow - Date Account Titles and Explanation Debit Credit Jan 12, Merchandise Inventory $3,120 Cash $3,120 (To record purchase of 30 units at $104 each) Mar 19, Cash $11,400 Sales $11,400 (To record sale of 60 units at $190 each) Cost of Goods Sold $7,040 Merchandise Inventory $7,040 (To record cost of 60 units sold at FIFO method; (50 units at $120 + 10 units a $104) Jun 8, Merchandise Inventory $2,320 Cash $2,320 (To record purchase of 20 units at $116) Nov 4, Cash $7,000 Sales $7,000 (To record sale of 35 units at $200 each for cash) Cost of Goods Sold $3,820 Merchandise Inventory $3,820 (To record cost of 35 units sold, fifo (20 units at $104 + 15 units at $116

a. Determination of the amount of ending inventory using a FIFO cost flow –

The ending inventory value computed using FIFO cost flow would be same under both the perpetual and periodic methods.

Hence, ending inventory value –

Ending inventory units = (50 + 30 +20) – (60 + 35) = 5 units

The ending units under the FIFO cost flow comprise of units from latest purchases. Hence, 5 units in ending inventory at valued at latest purchase price of $116 each.

Ending inventory value = $116 x 5 units = $580