At the beginning of October, Bowser Co.'s inventory consists of 60 units with a cost per unit of $40. The following transactions occur during the month of October. October 4 Purchase 120 units of inventory on account from Waluigi Co. for $50 per unit, terms 2/10, n/30.
October 5 Pay freight charges related to the October 4 purchase, $600.
October 9 Return 20 defective units from the October 4 purchase and receive credit.
October 12 Pay Waluigi Co. in full.
October 15 Sell 150 units of inventory to customers on account, $12,000.
October 19 Receive full payment from customers related to the sale on October 15.
October 20 Purchase 100 units of inventory from Waluigi Co. for $60 per unit, terms
1/10, n/30.
October 22 Sell 90 units of inventory to customers for cash, $7,200.
Required:
1. Assuming that Bowser Co. uses a FIFO perpetual inventory system to maintain its inventory records, record the transactions.
2. Assuming for preparing financial statements that Bowser Co. reports inventory using LIFO, record the LIFO adjustment.
3. Suppose by the end of October that the remaining inventory is estimated to have a market value per unit of $35, record any necessary adjustment for the lower-of-cost or market method after the LIFO adjustment.
4. Prepare the top section of the multiple-step income statement through gross profit for the month of October after the lower-of-cost-or-market adjustment.