Using the attached T-account template, prepare the entries to recognize the foll
ID: 2544904 • Letter: U
Question
Using the attached T-account template, prepare the entries to recognize the following transactions for ABC Company with respect to Inventory Item # 1234
Date
Transaction
Quantity
Purchase Price
Selling Price
1/1/17
Beginning Inventory
1,500
$10
1/10/17
Purchase
2,500
$15
1/12/17
Sale
(3,000)
$30
1/19/17
Purchase
2,000
$20
1/23/17
Sale
(500)
$31
1/29/17
Sale
(1,700)
$34
Use separate T-account templates to prepare the entries under the following criteria:
a. Periodic system, FIFO cost flow method
b. Perpetual system, FIFO cost flow method
c. Periodic system, LIFO cost flow method
d. Perpetual system, LIFO cost flow method
Date
Transaction
Quantity
Purchase Price
Selling Price
1/1/17
Beginning Inventory
1,500
$10
1/10/17
Purchase
2,500
$15
1/12/17
Sale
(3,000)
$30
1/19/17
Purchase
2,000
$20
1/23/17
Sale
(500)
$31
1/29/17
Sale
(1,700)
$34
Explanation / Answer
a. Periodic system under FIFO cost flow method:
January 10, 2017:
Purchases (2500 units * $15) 37500
Accounts payable 37500
January 12, 2017:
Accounts receivable (3000*30) 90,000
sales 90,000
January 19, 2017:
Purchases (2000 units * $20) 40,000
Accounts payable 40,000
January 23, 2017:
Accounts receivable (500*31) 15,500
sales 15,500
January 29, 2017:
Accounts receivable (1700*34) 57,800
sales 57,800
January 31, 2017:
Inventory(Ending) (800*10) 8,000
Cost of goods sold (15000+37500+40000-8000) 84500
Purchases 77500
Inventory(beginning) 15000
b. Perpetual system under FIFO cost flow method:
January 10, 2017:
Inventory (2500 units * $15) 37500
Accounts Payable 37500
January 12, 2017:
According to FIFO assumption, first costs incurred are first costs expensed, the cost of 3000 units sold on 12 January would, therefore, be computed as follows:
Cost of 1500 units (from beginning inventory): 1500 units × $10 = $15,000
Cost of 1500 units (from units purchased on January 10): 1500 units × $15 = $22,500
Total cost of 3000 units sold on January 12: $15,000 + $22,500 = $37,500
Accounts receivable (3000 units * $30) 90,000
Sales 90,000
Cost of goods sold 37,500
Inventory 37,500
January 19, 2017:
Inventory (2000 units * $20) 40,000
Accounts Payable 40,000
January 23, 2017:
According to FIFO assumption, first costs incurred are first costs expensed, the cost of 500 units sold on 23 January would, therefore, be computed as follows:
Cost of 500 units (from January 10 purchase): 500 units × $15 = $7,500
Accounts receivable (500 units * $31) 15,500
Sales 15,500
Cost of goods sold 7,500
Inventory 7,500
January 29, 2017:
According to FIFO assumption, first costs incurred are first costs expensed, the cost of 1700 units sold on 29 January would, therefore, be computed as follows:
Cost of 500 units (from January 10 purchase): 500 units × $15 = $7,500
Cost of 1200 units (from units purchased on January 19): 1200 units × $20 = $24,000
Total cost of 3000 units sold on January 12: $7,500 + $24,000 = $31,500
Accounts receivable (1700 units * $34) 57,800
Sales 57,800
Cost of goods sold 31,500
Inventory 31,500
c.Periodic system under LIFO cost flow method:
January 10, 2017:
Purchases (2500 units * $15) 37500
Accounts payable 37500
January 12, 2017:
Accounts receivable (3000*30) 90,000
sales 90,000
January 19, 2017:
Purchases (2000 units * $20) 40,000
Accounts payable 40,000
January 23, 2017:
Accounts receivable (500*31) 15,500
sales 15,500
January 29, 2017:
Accounts receivable (1700*34) 57,800
sales 57,800
January 31, 2017:
Inventory(Ending) (800*10) 8,000
Cost of goods sold (15000+37500+40000-8000) 84500
Purchases 77500
Inventory(beginning) 15000
d. Perpetual system under LIFO cost flow method:
January 10, 2017:
Inventory (2500 units * $15) 37500
Accounts Payable 37500
January 12, 2017:
According to LIFO assumption, last costs incurred are first costs expensed, the cost of 3000 units sold on 12 January would, therefore, be computed as follows:
Cost of 2500 units (from units purchased on January 10): 2500 units × $15 = $37,500
Cost of 500 units (from beginning inventory): 500 units × $10 = $5000
Total cost of 3000 units sold on January 12: $37,500 + $5000 = $42,500
Accounts receivable (3000 units * $30) 90,000
Sales 90,000
Cost of goods sold 42,500
Inventory 42,500
January 19, 2017:
Inventory (2000 units * $20) 40,000
Accounts Payable 40,000
January 23, 2017:
According to LIFO assumption, last costs incurred are first costs expensed, the cost of 500 units sold on 23 January would, therefore, be computed as follows:
Cost of 500 units (from January 19 purchase): 500 units × $20 = $10,000
Accounts receivable (500 units * $31) 15,500
Sales 15,500
Cost of goods sold 10,000
Inventory 10,000
January 29, 2017:
According to LIFO assumption, last costs incurred are first costs expensed, the cost of 1700 units sold on 29 January would, therefore, be computed as follows:
Cost of 1500 units (from January 19 purchase): 1500 units × $20 = $30,000
Cost of 200 units (from beginning balance): 200 units × $10 = $2,000
Total cost of 3000 units sold on January 12: $30,000 + $2,000 = $32,000
Accounts receivable (1700 units * $34) 57,800
Sales 57,800
Cost of goods sold 32,000
Inventory 32,000
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