5SE_2 - Horngren'S Financial And Managerial Accounting

Question

Question: Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries—LIFO

 

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.

Step-by-Step Solution

Answer

The revenue generated through sales amounts to $3,400and the gross profit earned is $1,088.

 

Step-by-Step-Solution Step1: Journal entry for purchase of inventory

Date	Description	Debit	Credit
Oct 16	Merchandise Inventory (bicycles)	$2,720
	Accounts Payable		$2,720
	Being inventories purchased on credit

Step 2: Journal entry for the sale of inventory

Date	Description	Debit	Credit
Oct 31	Accounts Receivables	$3,400
	Sales Revenue		$3,400
	Being inventories purchased on credit
Oct 31	Cost of goods sold	$2,312
	Merchandise inventory (bicycles)		$2,312
	Being goods sold valued based on LIFO