Question

Required information [The following information applies to the questions displayed below.] Part 2 of 3 The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 20 Apr. 21 July 25 Sept. 19 Purchased 400 units @ $ 8 = $3,200 Purchased 200 units @ $10 = 2,000 Purchased 280 units @ $13 = 3,640 Purchased 90 units @ $15 = 1,350 points During the year, The Shirt Shop sold 810 T-shirts for $20 each. b. Record the above transactions in general journal form and post to T-accounts using (1) FIFO, (2) LIFO, and (3) weighted average. Use a separate set of journal entries and T-accounts for each method. Assume all transactions are cash transactions.

Answer 1

Valuation of Inventory using FIFO method
Date	Pur Qty	Rate	Value	Sold Qty	Closing balance	Pur rate	Closing Inventory Value
Jan.20	400	8	3200	400	0	8	0
Apr.21	200	10	2000	200	0	10	0
July.25	280	13	3640	210	70	13	910
Sep.19	90	15	1350		90	15	1350
Total	970		10190	810			2260
So, Cost of Goods Sold =			10190 - 2260 =		7930

Journal Entries

No	Date	General Journal	Debit	Credit
1	Year 1	Cash	16200
		Sales Revenue		16200
2	Year 1	Cost of Goods Sold	7930
		Merchandise inventory		7930

Valuation of Inventory using LIFO method
Date	Pur Qty	Rate	Value	Sold Qty	Closing balance	Pur rate	Closing Inventory Value
Jan.20	400	8	3200	240	160	8	1280
Apr.21	200	10	2000	200	0	10	0
July.25	280	13	3640	280	0	13	0
Sep.19	90	15	1350	90	0	15	0
Total	970		10190	810			1280
So, Cost of Goods Sold =			10190 - 1280 =		8910

Journal Entries
No	Date	General Journal	Debit	Credit
1	Year 1	Cash	16200
		Sales Revenue		16200
2	Year 1	Cost of Goods Sold	8910
		Merchandise inventory		8910

Valuation of Inventory using Weighted Average method
Date	Pur Qty	Rate	Value	Sold Qty	Closing balance	Weighted Avg Rate	Closing Inventory Value
Jan.20	400	8	3200	240			0
Apr.21	200	10	2000	200			0
July.25	280	13	3640	280			0
Sep.19	90	15	1350	90			0
Total	970		10190	810	160	10.51	1,681
						(10190/970 Qty)
So, Cost of Goods Sold =			10190 - 1681 =		8509

Journal Entries
No	Date	General Journal	Debit	Credit
1	Year 1	Cash	16200
		Sales Revenue		16200
2	Year 1	Cost of Goods Sold	8509
		Merchandise inventory		8509

Cost of Goods Sold A/c			FIFO
Date	Particulars	Debit	Date	Particulars	Credit
Year 1	To Merchandise Inventory	7930
			Year 1	By Bal c/f	7930
		7930			7930
Cost of Goods Sold A/c			LIFO
Date	Particulars	Debit	Date	Particulars	Credit
Year 1	To Merchandise Inventory	8910
			Year 1	By Bal c/f	8910
		8910			8910
Cost of Goods Sold A/c			Weighted Average
Date	Particulars	Debit	Date	Particulars	Credit
Year 1	To Merchandise Inventory	8509
			Year 1	By Bal c/f	8509
		8509			8509