Question

HW 1: Texas Tennis Inc. carries an inventory of tennis rackets and related tennis products. The sales price of each racket is S140. Company records indicate the following activity for a particular line of rackets. Unit Cost $ 80 Item Balance Date Quantity May May 6 May 8 May 17 May 29 20 Sale on account $ 86 Purchase 15 Sale on account 15 Sale on account 3 Part 1 1 Prepare a perpetual inventory record for the rackets using the FIFO costing system. Then identify the cost of the ending inventory and cost of goods sold for the month Cost of Goods Sold Quantity Inventory Balance Quantity Purchases Date Quantity Unit Total Cost Unit Total Unit Total Cost Cost Cost Cost Cost RM $ 946 880 80 11 $86 4 86 344 Totals 15 27 8 (concept check: Beg. Bal Total Purchases - Cost of Goods Sold Ending Inventory) The cost of the ending inventory balance using the FIFO method is $ 1.5 The cost of goods sold for the month using the FIFO method is S 2. Journalize the transactions using the FIFO system. (assume the purchase and sales are made on 2. account) Record the sale of the tennis rackets on account on the 6th 9 units General Journal Account Name Debit 1,260 Credit sold x Accounts Receivable Sales Revenue $140 sales 1.260 price Record the cost of the rackets sold on the 6h General Journal Account Name Credit Debit 720 Merchandise Inventory 720

The Total Cost of May PURCHASES using the FIFO method is $_________

The Total Cost of May PURCHASES using the LIFO method is $_________

Thank you!

Answer 1

1.

Compute cost of goods sold and ending inventory under FIFO method :

FIFO method
	Purchases			Cost of goods sold			Inventory balance
Date	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost
May-01	20	80	1600				20	80	1600
May-06				9	80	720	11	80	880
May-08	15	86	1290				11	80	880
							15	86	1290
May-17				11	80	880
				4	86	344	11	86	946
May-29				3	86	258	8	86	688
	35		2890	27		2202	8	86	688

Cost of goods sold (FIFO) = 2202

Ending inventory = $ 688

2.

Journalize the transactions under FIFO as follows:

Record the transaction on may 6:

May-06	Accounts receivable (9 * 140)	1260
	Sales revenue		1260
May-06	Cost of good sold	720
	Merchandise inventory		720

Record the transaction on may 8:

May-08	Merchandise inventory	1290
	Cash		1290

Record the transaction on may 17:

May-17	Accounts receivable (15*140)	2100
	Sales revenue		2100
May-17	Cost of good sold	1224
	Merchandise inventory		1224

Record the transaction on may 29:

May-29	Accounts receivable (3*140)	420
	Sales revenue		420
May-29	Cost of good sold	258
	Merchandise inventory		258

3.

Compute cost of goods sold and ending inventory under LIFO method :

LIFO method
	Purchases			Cost of goods sold			Inventory balance
Date	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost	Quantity	Unit cost	Total cost
May-01	20	80	1600				20	80	1600
May-06				9	80	720	11	80	880
May-08	15	86	1290				11	80	880
							15	86	1290
May-17				15	86	1290	11	80	880
May-29				3	80	240	8	80	640
	35		2890	27		2250	8	80	640

Cost of goods sold (FIFO) = 2250

Ending inventory = $ 640

Journalize the transactions under LIFO as follows:

Record the transaction on may 6:

May-06	Accounts receivable (9 * 140)	1260
	Sales revenue		1260
May-06	Cost of good sold	720
	Merchandise inventory		720

Record the transaction on may 8:

May-08	Merchandise inventory	1290
	Cash		1290

Record the transaction on may 17:

May-17	Accounts receivable (15*140)	2100
	Sales revenue		2100
May-17	Cost of good sold	1290
	Merchandise inventory		1290

Record the transaction on may 29:

May-29	Accounts receivable (3*140)	420
	Sales revenue		420
May-29	Cost of good sold	240
	Merchandise inventory		240