Inventory as of Nov. 30th, 2010, consists of 20 bikes costing $550 each.
Balance Sheet: Nov. 30th 2010.
Cash-9150 Debit
Accounts Receivable-12300 Debit
Inventory-11000 Debit
Supplies-900 Debit
Office Equipment-18000 Debit
Accumulated Depreciation, Office Equipment- 3000 Credit
Accounts Payable- 1325 Credit
Note Payable, Long-Term- 5000 Credit
Common Stock- 8500 Credit
Retained Earnings-21425 Credit
Dividends- 4250 Debit
Sales Revenues- 93500 Credit
Sales Returns and Allowances- 1700 Debit
Slaes Discounts- 1275 Debit
Cost of Goods Sold-46750 Debit
Sales Commissions-11300 Debit
Office Salaries Expense-7425 Debit
Office Rent Expense-5500 Debit
Shipping Expense-3200 Debit
Total 132,750/132,750
Transactions: December
4th- Purchased 10 bikes for 575 each from Slickrock, on account. Terms, 2/15, n/45, FOB destination
6th- Sold 14 bikes for 1100 each on account to Allsport. Terms 3/10, n/30, FOB destination
8th- Paid 175 freight charges to deliver goods to Allsport
10th- Received 6200 from Cyclemart as payment on a Nov. 17th purchase. Terms were n/30.
12th- Purchased 350 of supplies on account from Officemax, terms 2/10, n/30, FOB destination
14th- Received payment in full from Allsport Inc, for the Dec. 6 sales
16th- Purchased 15 bikes for 600 each from Slickrock on account, terms 2/15, n/45, FOB destination
18th- Paid Slickrock the amount due from the Dec. 4th purchase in full
19th- Sold 18 bikes for 1,125 each on account to Bikeworld, terms 2/15, n/45, FOB destination
20th- Paid for the supplies purchased on Dec. 12th
22th- Paid sales commissions 875
30th- Paid current month's rent 500
Questions: How do I do a FIFO perpetual inventory record? I am so incredibly confused and lost right now. Please explain to me how this is done? Please!
To do a FIFO (First-In, First-Out) perpetual inventory record, you need to keep track of your inventory purchases and sales in the order they occurred. Here's a step-by-step explanation of how to do it using the given transactions:
1. Start with the initial inventory: On November 30th, 2010, you had 20 bikes costing $550 each. The total cost of the initial inventory is 20 bikes * $550 = $11,000.
2. Record the purchases: Identify the bikes purchased on December 4th and December 16th. According to the transactions, you purchased 10 bikes for $575 each on December 4th and 15 bikes for $600 each on December 16th, both from Slickrock.
3. Determine the cost of goods available for sale: Add the cost of the initial inventory and the purchases to get the total cost of goods available for sale. In this case, it is $11,000 (initial inventory) + ($10 bikes * $575) + ($15 bikes * $600) = $11,000 + $5,750 + $9,000 = $25,750.
4. Calculate the cost of goods sold: To determine the cost of goods sold, you need to know the quantity of bikes sold. From the given transactions, you sold 14 bikes to Allsport on December 6th and 18 bikes to Bikeworld on December 19th. Both sales were made on account.
5. Apply the FIFO principle: FIFO assumes that the oldest inventory is sold first. Therefore, you need to allocate the costs of the bikes sold based on the earliest purchases.
6. Calculate the cost assigned to the December 6th sale: Since you sold 14 bikes to Allsport on December 6th, you will assign the cost of the 10 bikes purchased on December 4th (the oldest) and 4 bikes from the purchase made on December 16th. The cost for the 10 bikes is $575 each, resulting in a total cost of $5,750. For the remaining 4 bikes from the December 16th purchase, the cost is $600 each, resulting in a total cost of $2,400. Therefore, the total cost assigned to the December 6th sale is $5,750 + $2,400 = $8,150.
7. Calculate the cost assigned to the December 19th sale: Since you sold 18 bikes to Bikeworld on December 19th, you will assign the cost of the 10 bikes purchased on December 4th (the oldest) and the remaining 8 bikes from the purchase made on December 16th. The cost for the 10 bikes is $575 each, resulting in a total cost of $5,750. For the remaining 8 bikes from the December 16th purchase, the cost is $600 each, resulting in a total cost of $4,800. Therefore, the total cost assigned to the December 19th sale is $5,750 + $4,800 = $10,550.
8. Calculate the value of the ending inventory: Subtract the total cost assigned to the sales from the cost of goods available for sale. In this case, it is $25,750 (cost of goods available for sale) - ($8,150 + $10,550) (cost assigned to sales) = $25,750 - $18,700 = $7,050.
9. Verify your inventory value: Compare the value of the ending inventory calculated using FIFO perpetual inventory with the given information to ensure it matches. In this case, the ending inventory value is $7,050.
By following these steps, you can maintain a FIFO perpetual inventory record for your bike inventory based on the given transactions.