Accounting for inventory using the perpetual system—LIFO and journalizing inventory transactions Health World began January with an inventory of 50 crates of vitamins that cost a total of $1,000. During the month, Health World purchased and sold merchandise on account as follows:
|
Purchase 1 |
100 crates @ $ 25 |
|
Sale 1 |
130 crates @ $ 40 |
|
Purchase 2 |
90 crates @ $ 30 |
|
Sale 2 |
100 crates @ $ 50 |
Health World uses the LIFO method. Cash payments on account totaled $5,500. Operating expenses for the month were $3,000, with two thirds paid in cash and the rest accrued as Accounts payable.
Requirements
1. Which inventory method most likely mimics the physical flow of Health World’s inventory?
2. Prepare a perpetual inventory record, using LIFO cost, for this merchandise.
3. Journalize all transactions using LIFO.