hercula cycles started may with 5 bicycles that cost $48 each. on may 16, hercula purchased 30 bicycles at…

hercula cycles started may with 5 bicycles that cost $48 each. on may 16, hercula purchased 30 bicycles at $55 each. on may 31, hercula sold 25 bicycles for $96 each.\nrequirements\n1. prepare hercula cycles perpetual inventory record assuming the company uses the fifo inventory - costing method\n2. journalize the may 16 purchase of merchandise inventory on account and the may 31 sale of merchandise inventory on account\nrequirement 1. prepare hercula cycles perpetual inventory record assuming the company uses the fifo inventory - costing method\nstart 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)\nhercula cycles\n| date | purchases | cost of goods sold | inventory on hand |\n| ---- | ---- | ---- | ---- |\n| | qty | unit cost | tot cost | qty | unit cost | tot cost | qty | unit cost | tot cost |\n| may 1 | | | | | | | | | |

hercula cycles started may with 5 bicycles that cost $48 each. on may 16, hercula purchased 30 bicycles at $55 each. on may 31, hercula sold 25 bicycles for $96 each.\nrequirements\n1. prepare hercula cycles perpetual inventory record assuming the company uses the fifo inventory - costing method\n2. journalize the may 16 purchase of merchandise inventory on account and the may 31 sale of merchandise inventory on account\nrequirement 1. prepare hercula cycles perpetual inventory record assuming the company uses the fifo inventory - costing method\nstart 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)\nhercula cycles\n| date | purchases | cost of goods sold | inventory on hand |\n| ---- | ---- | ---- | ---- |\n| | qty | unit cost | tot cost | qty | unit cost | tot cost | qty | unit cost | tot cost |\n| may 1 | | | | | | | | | |

Answer

Explanation:

Step1: Record beginning inventory

On May 1, beginning inventory has 5 bicycles at $48 each.

Date Purchases Cost of Goods Sold Inventory on Hand
May 1 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5, Unit Cost: $48, Tot Cost: $48×5 = $240

Step2: Record May 16 purchase

On May 16, 30 bicycles are purchased at $55 each.

Date Purchases Cost of Goods Sold Inventory on Hand
May 1 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5, Unit Cost: $48, Tot Cost: $240
May 16 QTY: 30, Unit Cost: $55, Tot Cost: $55×30 = $1650 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5 (old - $48), 30 (new - $55), Tot Cost: $240 + $1650 = $1890

Step3: Record May 31 sale using FIFO

On May 31, 25 bicycles are sold. First, sell the 5 bicycles from the beginning inventory and then 20 from the May 16 purchase. Cost of Goods Sold: (5×$48)+(20×$55) = $240 + $1100 = $1340 Inventory on Hand: 30 - 20 = 10 bicycles from May 16 purchase.

Date Purchases Cost of Goods Sold Inventory on Hand
May 1 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5, Unit Cost: $48, Tot Cost: $240
May 16 QTY: 30, Unit Cost: $55, Tot Cost: $1650 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5 (old - $48), 30 (new - $55), Tot Cost: $1890
May 31 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5 (at $48), 20 (at $55), Tot Cost: $1340 QTY: 10, Unit Cost: $55, Tot Cost: $55×10 = $550

For requirement 2 - Journal entries: The May 16 purchase on account: Debit: Merchandise Inventory $1650 Credit: Accounts Payable $1650 The May 31 sale on account: Debit: Accounts Receivable ($96×25) = $2400 Credit: Sales Revenue $2400 Debit: Cost of Goods Sold $1340 Credit: Merchandise Inventory $1340

Answer:

Date Purchases Cost of Goods Sold Inventory on Hand
May 1 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5, Unit Cost: $48, Tot Cost: $240
May 16 QTY: 30, Unit Cost: $55, Tot Cost: $1650 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5 (at $48), 30 (at $55), Tot Cost: $1890
May 31 QTY: 0, Unit Cost: 0, Tot Cost: 0 QTY: 5 (at $48), 20 (at $55), Tot Cost: $1340 QTY: 10, Unit Cost: $55, Tot Cost: $550
Journal entries:
May 16 purchase:
Debit: Merchandise Inventory $1650
Credit: Accounts Payable $1650
May 31 sale:
Debit: Accounts Receivable $2400
Credit: Sales Revenue $2400
Debit: Cost of Goods Sold $1340
Credit: Merchandise Inventory $1340