Question

new tech cycles started january with 25 bicycles that cost $65 each. on january 16, new tech purchased 50 bicycles at $80 each. on january 31, new tech sold 41 bicycles for 105 each. requirements 1. prepare new tech cycles perpetual inventory record assuming the company uses the lifo inventory - costing method. 2. journalize the january 16 purchase of merchandise inventory on account and the january 31 sale of merchandise inventory on account. requirement 1. prepare new tech cycles perpetual inventory record assuming the company uses the lifo inventory - costing method. start by entering the beginning inventory balances. enter the transactions in chronological order, calculating new inventory on - hand balances after each transaction. once all of the transactions have been entered into the perpetual record, calculate the quantity and total cost of inventory purchased, sold, and on hand at the end of the period. (for inventory on hand, enter the oldest inventory layers first. for cost of goods sold, enter the inventory layers in the order in which they are removed from inventory. abbreviation used: qty = quantity, tot = total) new tech cycles purchases cost of goods sold inventory on hand date qty unit cost tot cost qty unit cost tot cost qty unit cost tot cost jan 1

Explanation:

Step1: Initial inventory

On January 1, there are 25 bicycles with a unit - cost of $65 each.

Date	Purchases	Cost of Goods Sold	Inventory on Hand

Step2: January 16 purchase

On January 16, 50 bicycles are purchased at $80 each.

Date	Purchases	Cost of Goods Sold	Inventory on Hand
Jan 16	QTY: 50, Unit Cost: 80, Tot Cost: $50\times80=4000$	QTY: 0, Unit Cost: 0, Tot Cost: 0	QTY: 25 (old), Unit Cost: 65, Tot Cost: 1625; QTY: 50 (new), Unit Cost: 80, Tot Cost: 4000; Total QTY: 75, Total Cost: $1625 + 4000=5625$

Step3: January 31 sale

On January 31, 41 bicycles are sold. Using LIFO, we sell 41 from the most recent (January 16) purchase.
Cost of Goods Sold: QTY: 41, Unit Cost: 80, Tot Cost: $41\times80 = 3280$
Inventory on Hand:

• From the January 16 purchase: $50 - 41=9$ bicycles at $80 each, cost $9\times80 = 720$
• From the January 1 purchase: 25 bicycles at $65 each, cost $25\times65 = 1625$

Total inventory on hand: QTY: $9 + 25=34$, Tot Cost: $720+1625 = 2345$

Date	Purchases	Cost of Goods Sold	Inventory on Hand
Jan 16	QTY: 50, Unit Cost: 80, Tot Cost: 4000	QTY: 0, Unit Cost: 0, Tot Cost: 0	QTY: 25 (old), Unit Cost: 65, Tot Cost: 1625; QTY: 50 (new), Unit Cost: 80, Tot Cost: 4000; Total QTY: 75, Total Cost: 5625
Jan 31	QTY: 0, Unit Cost: 0, Tot Cost: 0	QTY: 41, Unit Cost: 80, Tot Cost: 3280	QTY: 25 (old), Unit Cost: 65, Tot Cost: 1625; QTY: 9 (new), Unit Cost: 80, Tot Cost: 720; Total QTY: 34, Total Cost: 2345

For the journal - entries:

1. January 16 purchase of merchandise inventory on account:

Debit: Merchandise Inventory $4000$
Credit: Accounts Payable $4000$

1. January 31 sale of merchandise inventory on account:

Debit: Accounts Receivable ($41\times105$) $4305$
Credit: Sales Revenue $4305$
Debit: Cost of Goods Sold $3280$
Credit: Merchandise Inventory $3280$

Answer:

1. See the above - constructed perpetual inventory record.

2.

• January 16:
• Debit: Merchandise Inventory $4000$
• Credit: Accounts Payable $4000$
• January 31:
• Debit: Accounts Receivable $4305$
• Credit: Sales Revenue $4305$
• Debit: Cost of Goods Sold $3280$
• Credit: Merchandise Inventory $3280$