Inventory Flow Assumptions
the Perpetual Inventory Records of Handy Hardware

question 71

Essay

Inventory flow assumptions
The perpetual inventory records of Handy Hardware show 150 units of a particular product on hand, acquired at the following dates and costs:
On June 3, Handy sold 120 units of this product.
Instructions: Prepare a journal entry to record the cost of goods sold relating to the sale on June 3, assuming that Handy uses:
(a) A LIFO flow assumption.
(b) A FIFO flow assumption.
(c) The average cost (or moving average) flow assumption.
$$\begin{array} { | l | c | c | c | } \hline \text { Purchase } & \text { Quantity } & \text { Unit Cost } & \text { Total Cost } \\\hline \text { Date } & & & \\\hline \text { May 10 } & 50 & \$ 85 & \$ 4,250 \\\hline \text { June 1 } & \underline { 100 } & 100 & \underline { 10,000 } \\\hline \text { Total on hand } & \underline { \underline { 150 } } & & \underline { \underline { \$ 14,250 } } \\\hline & & & \\\hline\end{array}$$ $\begin{array}{lrr}&\text { General Journal }\\ \text {20 } &\\ \text {June 3 \underline{\quad} } &\\ \text { (a) } &\\ \text { (b) } &\\ \text { (c)} &\\\end{array}$

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