Accounting for inventory using the perpetual system—LIFO and journalizing inventory transactions [30-40 min]
Health World began January with an inventory of 50 crates of vitamins that cost a total of $1,000. During the month, Health World purchased and sold merchandise on account as follows:
Purchase 1 . . . . . . . . | 100 crates @ | $ 25 |
Sale 1 . . . . . . . . . . . . | 130 crates @ | $ 40 |
Purchase 2 . . . . . . . . | 90 crates @ | $ 30 |
Sale 2 . . . . . . . . . . . . | 100 crates @ | $ 50 |
Health World uses the LIFO method.
Cash payments on account totaled $5,500. Operating expenses for the month were $3,000, with two-thirds paid in cash and the rest accrued as Accounts payable.
Requirements
1. Which inventory method most likely mimics the physical flow of Health World’s inventory?
2. Prepare a perpetual inventory record, using LIFO cost, for this merchandise.
3. Journalize all transactions using LIFO.
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