Health World began January with an inventory of 50 crates

Price: $3.99


P6-38B Accounting for inventory using the perpetual system—LIFO and
journalizing inventory transactions [30–40 min]

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.