Ward Hardware used the FIFO inventory costing method in 2017. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward's decision? A. Consistency Principle Your answer is correct. B. Disclosure Principle C. Materiality Concept D. Accounting Conservatism Requirement 1. The inventory costing method that averages cost changes is the: A. Specific identification method B. First-in, first-out (FIFO) cost method C. Weighted-average method Your answer is correct. D. Last-in, first-out (LIFO) cost method Requirement 2. The inventory costing method that expenses out the newer purchases of goods is the: A. First-in, first-out (FIFO) cost method B. Specific identification method C. Last-in, first-out (LIFO) cost method Your answer is correct. D. Weighted-average method Requirement 1. Prepare BostonBoston Cycle's perpetual inventory record assuming the company uses the specific identification inventory costing method. Assume that BostonBoston sold 2020 bicycles that cost $ 65$65 each and 1010 bicycles that cost $ 80$80 each. 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)
Boston Cycles Purchases Cost of Goods Sold Inventory on Hand Date QTY Unit Cost Tot. Cost QTY Unit Cost Tot. Cost QTY Unit Cost Tot. Cost Jul. 1 25 $65 $1,625 Jul. 16 50 $80 $4,000 25 $65 $1,625 50 $80 $4,000 Jul. 31 20 $65 $1,300 5 $65 $325 10 $80 $800 40 $80 $3,200 Totals 50 $4,000 30 $2,100 45 $3,525 Requirement 2. Journalize the July 16July 16 purchase of merchandise inventory on account and the July 31July 31 sale of merchandise inventory on account. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) July 16July 16: Purchased merchandise inventory on account. Date Accounts and Explanation Debit Credit Jul. 16 Merchandise Inventory 4,000 Accounts Payable 4,000 To purchase inventory on account. July 31July 31: Sale of merchandise inventory on account. Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step. (Assume that BostonBoston sold the bicycles for $ 90$90 each.) Date Accounts and Explanation Debit Credit Jul. 31 Accounts Receivable 2,700 Sales Revenue 2,700 To record sale on account.
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- Spring '12
- Accounting, 1966, Goods Sold, 1970, 1977, FIFO and LIFO accounting