Question

39. Floor Covering Inc. maintains inventory records using a perpetual costing system and a FIFO cost flow assumption. Data for June 2018, is as follows:

June 1           Balance               90 units at $10
June 10         Purchase            110 units at $12
June 15         Sale                    120 units at $20
June 17         Purchase            130 units at $13
June 27         Sale                    100 units at $20

The journal entry for the sale on June 27 will include a:

Select one:

a. debit to Cost of Goods Sold for $1,220

b. debit to Cost of Goods Sold for $1,300

c. debit to Inventory for $1,400

d. Credit to Cost of Goods Sold for $1,300

Answer 1

As per FIFO method, cost of goods sold of 100 units sold on June 21 will be calculated as under:

Date	Units	Unit Cost	Total Cost
Jun 10	80	$12	$960
Jun 17	20	$13	$260
Total	100		$1,220

Cost of goods sold on June 27 = $1,220

The following journal entry will be made to record cost of goods sold on June 27 under perpetual system:

Date	General Journal	Debit	Credit
June 27	Cost of goods sold	$1,220
	Inventory		$1,220
	( To record cost of goods sold)

a. debit to Cost of Goods Sold for $1,220

Correct option is a.