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Horngren'S Financial And Managerial Accounting
Found in: Page 358

Short Answer

Question: Boston Cycles started October with 12 bicycles that cost $42 each. On October 16, Boston bought 40 bicycles at $68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries—FIFO

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.

The revenue generated through sales amounts to $3,400 and the gross profit earned is $1,400.

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep1: Journal entry for purchase of inventory

Date

Description

Debit

Credit

Oct 16

Merchandise Inventory (bicycles)

$2,720

Accounts Payable

$2,720

Being inventories purchased on credit

Step 2: Journal entry for the sale of inventory

Date

Description

Debit

Credit

Oct 31

Accounts Receivables

$3,400

Sales Revenue

$3,400

Being inventories purchased on credit

Oct 31

Cost of goods sold

$2,000

Merchandise inventory (bicycles)

$2,000

Being goods sold valued based on FIFO

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