AZ Cycles started

May

with

15

bicycles that cost

$54

each. On

May 16,

AZ

purchased

30

bicycles at

$78

each. On

May 31,

AZ

sold

23

bicycles for

$98

each.

Requirements

1.	Prepare AZ Cycle's perpetual inventory record assuming the company uses the LIFO inventory costing method.
2.	Journalize the May 16 purchase of merchandise inventory on account and the May 31 sale of merchandise inventory on account.

Requirement 1. Prepare

AZ

Cycle's 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 cost of goods sold, enter the first layer out under LIFO costing first. For inventory on hand, enter the oldest inventory layer first. Abbreviation used: QTY = Quantity; Tot. = Total)

AZ 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
May 1

May 16

May 31

Totals

Requirement 2. Journalize the

May 16

purchase of merchandise inventory on account and the

May 31

sale of merchandise inventory on account. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. Check your spelling carefully and do not abbreviate.)

May 16:

Purchased merchandise inventory on account.

Date		Accounts and Explanation	Debit	Credit
May	16

May 31:

Sale of merchandise inventory on account.Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step. (Assume that

AZ

sold the bicycles for

$98

each.)

Date		Accounts and Explanation	Debit	Credit
May	31

Now journalize the expense related to the

May

31 sale.Review the perpetual inventory record you prepared in Requirement 1.

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Date		Accounts and Explanation	Debit	Credit
May	31