The document provides a step-by-step guide on calculating LIFO (Last In, First Out) inventory and recording sales and purchases transactions for January 2011. It outlines the necessary calculations for tracking inventory layers, cost of merchandise sold, and the updates needed after each transaction. Additionally, it instructs on how to appropriately journalize these transactions under a perpetual system.

1. APPLY THE CONCEPTS: LIFO inventory calculation
Click here
to review an illustrated example of the LIFO calculation. The
steps illustrated in the example are recapped below.
1. Start with beginning inventory.
2. Add inventory layers as purchases are made.
3. Compute the cost of merchandise sold as sales occur. Use
only the cost of merchandise available for sale as of the sales
date.
4. Update the inventory balance after each transaction. (Be sure
you do not use an amount more than once.)
5. Determine the ending inventory for the period.
Below is the data for the month of January, 2011.
1/1 Beg. Inv.
150 Units @ $10
1/8 Purchase
120 Units @ $12
1/14 Sale
84 Units
1/22 Purchase
100 Units @ $8
1/25 Sale
124 Units
Compute the LIFO layers amounts for the cost of merchandise
available for sale after each purchase and sale.
After 1/8 Purchase
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]

2. value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
After 1/14 Sale
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
After 1/22 Purchase
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $

3. [removed]
value of the layer
Layer 3
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
After 1/25 Sale
Layer 1
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Layer 2
[removed]
units $
[removed]
price per unit $
[removed]
value of the layer
Based on your answers above, complete the worksheet below.
LIFO Inventory Worksheet
Transaction
Purchases
Cost of Merchandise Sold
Inventory balance
1/1 Beg. Inv.
150 Units @ $10

4. $1,500
1/8 Purchase
120 Units @ $12
$
[removed]
$
[removed]
1/14 Sale
84 Units
$
[removed]
$
[removed]
1/22 Purchase
100 Units @ $8
$
[removed]

5. $
[removed]
1/25 Sale
124 Units
$
[removed]
$
[removed]
Total
$
[removed]
$
[removed]
$
[removed]
Hide
APPLY THE CONCEPTS: Recording changes in inventory
under LIFO valuation
Under the perpetual system, two journal entries are are required
to record sales; one to record the sale and one to record the cost
of merchandise sold. Click on the links below to review the
journal entries for purchases and sales transactions.
Purchase
Sales
After a purchase or sale occurs, the transaction must be
recorded or journalized. In the following journal, record the
purchases and sales for the month, assuming that all inventory

6. purchases were made with cash and all sales were made on
account at a fixed unit price of $22 per unit. Several facts to
remember: (1) All inventory
purchases
are made with cash and cash only; (2) All
sales
are made on account and on account only; and (3) when
recording sales, Schiphol wants you to
record the revenue portion of the transaction first
.
If an amount box does not require an entry leave it blank.
Not sure about the account title? Click here to view the chart of
accounts.
+
Assets
+
Liabilities
+
Equity
+
Revenues/Gains
+
Expenses/Losses
GENERAL JOURNAL
page

7. DATE
DESCRIPTION
DOC.
NO.
POST.
REF.
DEBIT
CREDIT
1
[removed]
Jan.
08
[removed]
[removed]
1
2

8. [removed]
[removed]
[removed]
2
3
[removed]

9. 3
4
[removed]
Jan. 14 Record sale
[removed]
[removed]
4
5
[removed]
[removed]

10. [removed]
5
6
[removed]
6
7
[removed]

11. Jan. 14 Record cost
[removed]
[removed]
7
8
[removed]
[removed]
[removed]

12. 8
9
[removed]
9
10
[removed]
Jan.
22
[removed]

13. [removed]
10
11
[removed]
[removed]

14. [removed]
11
12
[removed]
12
13
[removed]
Jan. 25 Record sale
[removed]

15. [removed]
13
14
[removed]
[removed]
[removed]
14
15

16. [removed]
15
16
[removed]
Jan. 25 Record cost
[removed]
[removed]

17. 16
17
[removed]
[removed]
[removed]
17
18
[removed]

18. 18