Conservatism directs accountants to decrease the

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Cash payments on account totaled $5,000. Operating expenses for the month were $3,300, withtwo-thirds paid in cash, and the rest accrued as Accounts payable.Requirements1. Which inventory method most likely mimics the physical flow of Fit World’s inventory?2. Prepare a perpetual inventory record, using LIFO cost, for this merchandise.3. Journalize all transactions using LIFO.SOLUTIONReq. 1FIFO most closely mimics the physical flow of Fit World’s inventory.Req. 2VitaminsLIFOPurchasesCost of Goods SoldInventory on HandDateQuantityUnitCostTotalCostQuantityUnitCostTotalCostQuantityUnitCostTotalCostBeginning80$50$4,000Purchase 180504,000140$55 $7,700140557,700Sale 1140$55$7,70060503,00020501,000Purchase 260503,00016060 9,600160609,600Sale 2160609,60050502,5001050500Ending300$17,300330$18,80050$ 2,500Req. 3Journal EntryDATEACCOUNTS AND EXPLANATIONSPOST.REF.DEBITCREDITPurchase 1

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