After filling out a perpetual inventory card using fifo i need to find out how to prepare a journal entry to record a sale of 60 units sold assuming i got 5.00 each for them? Confused
To prepare a journal entry to record the sale of 60 units using the First-In, First-Out (FIFO) method, you need to follow a few steps. Here's how you can do it:
Step 1: Determine the cost of the inventory sold:
- Review your perpetual inventory card and identify the cost of the oldest units. FIFO assumes that the oldest items in inventory are sold first.
- Multiply the cost per unit with the number of units sold.
- For example, if the cost per unit is $4.00 and you sold 60 units, the cost of goods sold (COGS) would be 60 units * $4.00 = $240.00.
Step 2: Identify the revenue from the sale:
- Note the selling price per unit provided in the question. In this case, you sold each unit for $5.00.
- Multiply the selling price per unit with the number of units sold.
- For example, if you sold 60 units at $5.00 each, the total revenue from the sale would be 60 units * $5.00 = $300.00.
Step 3: Prepare the journal entry:
- Debit the COGS account with the cost of inventory sold. In this case, COGS would be debited for $240.00.
- Credit the revenue account with the total revenue from the sale. In this case, revenue would be credited for $300.00.
The journal entry would look like this:
Date | Account | Debit | Credit
----------------------------------------------------------------
| COGS | $240.00 |
| Revenue | | $300.00
Please note that this example assumes you only have one account for COGS, but in practice, you might have separate accounts for different types of inventory or cost of goods sold.