Question

Boston Cycles started May with 5 bicycles that cost $ 48 each. On May 16 comma Boston bought 30 bicycles at $ 55 each. On May 31 comma Boston sold 18 bicycles for $ 98 each. Requirements 1. Prepare Boston ​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 Boston ​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)

Answer 1

Answer:

(1)

DATE       QUANTY PRICE SUBTOTAL

beginning    5            $48   $240.00

may 16th   30             $30   $900.00

may 31th            -5             $48  -$240.00

                   -13    $30  -$390.00

Ending Inventory 17  $30.00   $510.00

(2)

(A)

inventory   900

 account payable 900

(B)

account receivble 1764

  sales revenue            1764

COGS                   630

    Inventory                   630

Explanation:

(1)

              beginning 5 bicycle 48

may 16th purchase  30           55

May 41th sold           18

     FIFO first unit first out

     We use the begining inventory first

       18 - 5 = 13

     We do not complete the request, we use 13 from the purchase

5 x 48 = 290

13 x 55 = 390

total COGS for the sale 630

Next we check for the ending inventory

30 - 13 = 17 units on ending ivnentory at 30 = 510

(2)

(A) the purchase increase the inventory account

  it was a purchase "on account" which means it was not paid. It generates a liability. An account payable

(B) the sale will generate a revenue 18 x 98 = 1764

because is on account we will have an account to receive. We are not receiving cash right away.

Also because the company use the perpetual inventory method, it will be needed to report the COGS